what companies doBring your learning to life with interactive learning, study, and exam preparation tools that support the printed
textbook. CourseMate includes an integrated eBook, videos and quizzes, flashcards and more.ExpressPAYOUT POLICY
15-1 Payout policy fundamentals
15-2 Factors affecting dividend and share repurchase decisions
15-3 Dividends in perfect and imperfect worlds
15-4 Real-world influences on payout policy
15-5 Payout policy: key lessons
DIVIDEND PAYOUTS GROWTH: STARBUCKS ANNOUNCES ITS FIRST DIVIDEND
In the first quarter of 2010, companies included in
the Standard & Poor’s (S&P) 500 Index posted the
biggest gain in dividend rates in over two years.
The gain was attributed to improving confidence
following the economy’s big downturn in 2008
and 2009. During the quarter, the S&P companies
announced planned dividend payments in excess
of US$4.4 billion, the largest amount since they
announced US$6.7 billion in the fourth quarter
of 2007. One cause of the increased payouts was
believed to be that a build-up of cash relative to the
market values of many companies had led them to
return a portion of profits to their shareholders.
Starbucks is a good example of one of these
dividend payers. After two years of layoffs and
store closings, in the first quarter of 2010, it issued
its first-ever dividend. Howard Schultz, company
founder and, at the time, CEO, announced that the
company’s ambitious turnaround had sliced US$580million from its expenses, and that the turnaround
was taking hold. He also indicated that, beyond
the announced 10% share dividend, the company
planned to ultimately boost that payment to as
much as 40% of its annual profit and expand its
effort to buy back its own shares. As many analysts
suggest, it appears that Starbucks has matured
beyond the fast-growth stage, and as a result will
likely implement plans to distribute cash to its
shareholders through both dividends and share
repurchases. This behaviour exemplifies that of a
long-term profitable company that has matured.
Sources: ‘S&P 500 Dividend Rates Post Biggest Gain in Over Two Years’,
Wall Street Journal, 19 March 2010, WSJ.com, http://www.blogs.wsj.com/
marketbeat/2010/03/19/sp-500-dividend-rates-post-biggest-gain-in-
over-two-years/tab/print/; ‘After Starbucks Dividend, Who’s Next?’,
Wall Street Journal, 24 March 2010, WSJ.com, http://www.blogs.wsj.com/
marketbeat/2010/03/24/after-starbucks-dividend-whos-next/; Ashley M.
Heher, ‘Starbucks to Pay First Dividend, Expands Buyback’,
Associated Press, 24 March 2010, http://www.finance.yahoo.com/news/
Starbucks-to-pay-first-apf-954916568.html?x=0&.v=6