Evaluate if Toyota Motor Corporation and General Motors Company:
a. Followed Lintner (1956) stylized facts on dividend policy from 2014 to 2017.
b. Dividend announcements during the above period influenced share prices of the two companies. The answer must include discussion on MM’s theory, the clientele effect and signalling hypothesis.
c. Dividend policies were influenced by their capital structure.
EPS & DPS and calculate pay out ratio, from there using 4 dividend policy and identify which policy they have been using.
Evaluate that divdend policy and whether the trend is following Lintner's saying
Same for General Motors.
Retrieve balance sheet and income statement, directly from company, yahoo finance, bloomberg, quote your source.
Find out the share price of these companies during that period. Look at dividend announcement frequency. Use year end, yearly, final dividend for that year, compare 4 and 4 final dividends.
Get the share price.
Find out whether they borrow more or less
Leverage ratio = D / D + E
Don't need to use market value, use book value. Take numbers straight from balance sheet.
Look at shareholders equity, how much is the L, do for 2014 to 2017
Find if the leverage increase, borrow more and more and track the dividend and trend of L, and trends of DPS , also rise over 4 years, explain why do you think they borrow more and DPS is increasing.
To give reason, do market research over the 4 years, see the business environment, what is happening in the industry and company and then explained they borrowed more, by right according to MM the more you borrow the higher chance you get bankruptcy but they are making full use of leverage and agreed to pay more EPS. Low DPS, interest expense become burden to them, they cut dividends