Forums › ACCA Forums › ACCA FM Financial Management Forums › Pay out ratio and sharehold wealth??
- This topic has 5 replies, 3 voices, and was last updated 10 years ago by neilsolaris.
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- November 30, 2013 at 1:15 pm #148593
Could some one please tell me how to calculate payout ratio and how you calculate shareholder wealth please???
Thank you
November 30, 2013 at 2:21 pm #148606The payout ratio is dividend per share / earnings per share
(or total dividends / total earnings – it is the same thing 🙂 )
The shareholders wealth is measured by the market value of their shares.
How to calculate it depends on the context of the question. The market value can be calculated by the dividend growth model, or using the P/E ratio, or using net assets.It is also often mentioned in rights issue questions – there is a lecture on rights issues.
November 30, 2013 at 3:14 pm #148619Would I be correct in saying, if it asks for the effect or increase in shareholders wealth, then the dividends received + capital gain should be taken into account?
November 30, 2013 at 6:19 pm #148689the question i just done it was dividend yield plus share price growth %
November 30, 2013 at 6:20 pm #148690…and thank you!!
November 30, 2013 at 8:32 pm #148712Yes, dividend yield + share price growth = increase in shareholder wealth (I think!).
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