140717712 Gainesboro Machine Tools Corp
Introduction – Company background
Dividend payment decisions
Policy analysis
◦ Zero dividend payout – pros and cons
◦ 40% or $0.2 per share – pros and cons
◦ Residual-dividend payout – pros and cons
Conclusion
Founded in 1923
In early days, it has designed and manufactured a number of machinery parts, including metal presses, dies and molds. By
1975, it has evolved as innovative producer of industrial machinery and machine tools.
In 1980, entered in CAD/CAM and established itself as industry leader
Aggressive entry of large foreign firms damped sales
The recent restructuring has improved efficiency and development of Artificial Workforce. System.
The company is expected to have good growth in future
For three years in a row since 2000, dividends had exceeded
earnings
In 2003, dividends were decreased to a level below earnings
Despite losses in 2004, small dividend was declared
It has not paid dividend in 2005 although it had committed earlier to pay sometime in 2005
Dividends is considered as a yardstick of a company's prospects Typically, mature, profitable companies pay dividends
If a company with a history of consistently rising dividend payments suddenly cuts its payments, investors should treat this as a signal that trouble is looming
Steady or increasing dividends is certainly reassuring, investors are wary of companies that rely on borrowings to finance those payments
Holding onto profits might lead to excessive executive compensation, sloppy management, and unproductive use of assets There are three main factors that may influence a
firm's dividend decision:
◦ Free-cash flow
◦ Dividend clienteles
◦ Information signalling
The firm pays out, as dividends, any cash that is surplus after
it invests in all available positive net present value projects.
It does not explain the observed dividend policies of realworld companies
Most companies pay relatively consistent dividends
Introduction – Company background
Dividend payment decisions
Policy analysis
◦ Zero dividend payout – pros and cons
◦ 40% or $0.2 per share – pros and cons
◦ Residual-dividend payout – pros and cons
Conclusion
Founded in 1923
In early days, it has designed and manufactured a number of machinery parts, including metal presses, dies and molds. By
1975, it has evolved as innovative producer of industrial machinery and machine tools.
In 1980, entered in CAD/CAM and established itself as industry leader
Aggressive entry of large foreign firms damped sales
The recent restructuring has improved efficiency and development of Artificial Workforce. System.
The company is expected to have good growth in future
For three years in a row since 2000, dividends had exceeded
earnings
In 2003, dividends were decreased to a level below earnings
Despite losses in 2004, small dividend was declared
It has not paid dividend in 2005 although it had committed earlier to pay sometime in 2005
Dividends is considered as a yardstick of a company's prospects Typically, mature, profitable companies pay dividends
If a company with a history of consistently rising dividend payments suddenly cuts its payments, investors should treat this as a signal that trouble is looming
Steady or increasing dividends is certainly reassuring, investors are wary of companies that rely on borrowings to finance those payments
Holding onto profits might lead to excessive executive compensation, sloppy management, and unproductive use of assets There are three main factors that may influence a
firm's dividend decision:
◦ Free-cash flow
◦ Dividend clienteles
◦ Information signalling
The firm pays out, as dividends, any cash that is surplus after
it invests in all available positive net present value projects.
It does not explain the observed dividend policies of realworld companies
Most companies pay relatively consistent dividends