Dividend Policy of FPL Group’s case is about if investors should buy, sell, or hold the decreasing shares of FPL stock. Florida Power & Light (FPL) is one of the largest electrical companies in the United States. An analyst from Merrill Lynch downgraded the FPL stock after months of decreasing share price. On May 5th 1994, Florida Power & Lights’ stock price fell by 6 per cent after that analysis. From September of 1993 to May of 1994 the price has decreased by 19.6 per cent. Income investors and growth investors are the two ways that people like to invest. Companies like FPL pay a portion of earnings back to their shareholders in the form of dividends. Income investors are highly affected by the dividend return on utility stocks. It is believed that the FPL dividend and the dividend payout ratio is too high compared to similar companies. Three alternatives for FPL would be to cut, increase, or keep the dividend price of $2.48. The fluctuation of a dividend price is really risky though. Two examples were given in the case that showed what could happen if a company decides to cut the dividend. I believe shareholders should keep a hold on the stock because the company hasn’t made any decisions as to what they plan to do.
In order to understand why investors should hold their shares of FPL stock, we need to understand what dividends are. A dividend is a percentage of net income that is given directly to the shareholders. Dividends are a great way to attract new shareholders and retain current ones. High dividends tend to attract income investors who are looking to receive steady cash. Investors can then invest in something else or just use the money to put back into the economy. The other type of investor is called a growth investor. They tend to focus on stocks with long term capital appreciation. The company will then grow and hopefully the price of the stock will rise also. The problem is that FPL’s stock has been on the decline. An analyst from Merrill Lynch projected the company to drop off and the stock dropped another 6 per cent. Management is blaming the dividends but would altering them really help?
The three ways to affect a dividend are decrease, increase, and hold. That is the big debate that FPL has gotten into. In 1994 dividends were at $2.48 with over 90 per cent of a payout. Utility companies tend to have a high payout but the rest of the companies were only in the 70’s. Management thinks that FPL should cut back on their payout ratio by around 30 per cent. That would be great but the company doesn’t have much room to expand. FPL only has an 8.6 per cent capacity margin which doesn’t give them much room for internal growth. Also, companies such as Consolidated Edison Company of New York and Sierra Pacific resources tried to lower dividends and they got into major trouble financially. Lowering dividends is portrayed by shareholders as a
Dividend Policy at FPL Group Inc. Problem: On May 5, 1994 the utilities analyst of Merrill Lynch downgraded FPL Group Inc. due to an expectation of adjustment in dividend payments. The report also acknowledged the probability of a cut in the dividend. Kate Stark of First Equity Securities Corporation analyzes the situation and she has to predict what is going to happen. This investment alert was published dropped the stock price by 6% on the same day. 3 weeks ago Kate Stark has recommended a “hold”…
Tarun Aswani FPL Case Review The investment rating of FPL has recently been downgraded after talks of cutting dividends for the first time in 47 years were announced. This was due to a streamlining of its businesses and a new commitment to quality and customer service that would come from focusing on the utilities industry. Furthermore, this potential decrease in the dividend payout ratio would be a result in an evolving competitive market place. FPL has less room o grow than competitors as…
lowering it, raising it, keeping it the same, or doing a dividend split. Every option must be analyzed to figure out what would be best for The Western Company. Problems and Questions in the Case: 1 Why is The Western Company’s dividend policy so much higher than competitors? 2 The case constantly mentions FPL. Is the Western Company similar to this company? Should they even consider comparing themselves to that company? 3 A better insight of the impact of higher vs. lower dividend prices. 4 Could…
the front and back of your insurance card. Once received, we will bill your health insurance plan and send you a statement for the remaining balance. An insurance information update form and return envelope are attached for your convenience. In some cases, an insured patient may be eligible for charity care for the balance outstanding after payment by their health insurance. Please stop by or call a financial counselor to receive more information regarding this aspect of the Charity Care Policy. Uninsured…
replicate their technology. E-ink moved forward building up a team of high quality people and the rounds for fund-raise included investors with technology and media expertise beyond the financial corporate investors. (See Exhibit 2 from the case). E-ink partnership with Philips, which provided E Ink with the electronic expertise…
services delivered in a timely manner, in an appropriate setting, and with attention to continuity and quality of care. One barrier is clearly financial. Nearly 30 percent of nonelderly DC residents are below 200 percent of the federal poverty level (FPL) are uninsured. Another obstacle is availability. Numerous economically depressed sections of the city are underserved by health care providers. Hospitals and clinics that serve the poor are experiencing some financial pressure as competition among…
(NRC 2015). Uranium is a mineral, a very dense metal, that is found in the ground and is non-renewable, that means we cannot make more. It is a cheap and plentiful source. Power plants use the heat given off during fission as fuel to make electricity (FPL 2015). These poor men were never informed on the gravity of the situation and did not even know that the accident involved the reactor; they thought it was nothing more than a normal electrical fire. The priority of the fire fighters and military helicopter…
The South Carolina Department of Social Services APPLICATION for the FAMILY INDEPENDENCE PROGRAM (FI) SUPPLEMENTAL NUTRITION ASSISTANCE PROGRAM (SNAP) REFUGEE ASSISTANCE PROGRAM (RA) Do you need help filling out this application due to disability or impairment? Do you need an interpreter? If yes, please ask for help at your local DSS Office. To get the address or phone number of your local office, call toll free: 1-800-616-1309 or online at www.dss.sc.gov. Este es un formulario para solicitar…
Health Care Reform and American Federalism: The Next Inter-Governmental Partnership by Michael Sparer, J.D., Ph.D. with responses from state health policymakers September 2009 1 With the election of President Barack Obama, the issue of health reform returned to the national agenda. President Obama has made comprehensive reform a high priority, emphasizing the need to get reform enacted during his first year in office. Congress has been tasked with developing the details. The…
Professor Eric Freyfogle Property Spring 2012 * Acre = 43,560 sq feet (10 sq chains) * 4 rods = 1 chain = 66ft * In Western states, a person must obtain a usage right separate from the ownership of the land * To acquire a water right, one must: 1. Divert the water from the river 2. Apply it to a beneficial use a. Policy: because water is scarce b. Actual pattern of beneficial use is what you are limited to regardless of paper rights until then, you’re…