Dividend Policy
How has this company returned cash to its owners? Has it paid dividends, bought back stock, or spun off assets?
Given this firm’s characteristics today, how would you recommend that they return cash to stockholders (assuming that they have excess cash)?
A Framework for Analyzing Dividends
How much could this firm have returned to its stockholders over the last few years? How much did it actually return?
Given this dividend policy and the current cash balance of this firm, would you push the firm to change its dividend policy (return more or less cash to its owners)?
How does this firm’s dividend policy compare to those of its peer group and to the rest of the market?
Valuation
What type of cash flow (dividends, FCFE, or FCFF) would you choose to discount for this firm?
What growth pattern (Stable, 2-stage, 3-stage) would you pick for this firm? How long will high growth last?
*What is your estimate of value of equity in this firm? How does this compare to the market value?
**What is the “key variable” (risk, growth, leverage, profit margins, etc.) driving this value?
If you were hired to enhance value at this firm, what would be the path you would choose?
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