The year 2009 January to be exact the company announced the new dividend rates that were to start operational from the year 2010 onward. The idea here was to present a policy that would be seeking to pay an attractive sustainable and growing dividend to its shareholders. The period marked the end of the company paying interim and final dividend and started the paying quarterly dividends. The payments would be made with the announcement of the quarterly results. The changes were all in line with the policy launched by the manager. The changes were meant to align the payment with the cash flow of the business.
|Dividend in Euros
|Dividend growth in Euros
|Dividend in Pounds
|Dividend growth in Pounds
The above data shows the dividend from the time of change in the dividend policy. The data shows that the share dividend of the company has constantly grown for a period of two years by a 3% margin upon the introduction of the changes in the policy. The losses experienced are reduced relatively for the same period. The company has managed to register an increase in the dividend delivery for the two years. Despite the inflation rates in the world, the company performance was above average.
The sustainable aspect is also important when looking at the dividend rate of the company. To do this, there is need to look at the free cash flow of the shares of the Unilever Company.
|Total 2010- 2012
|FCF (billion Euros)
|Gross dividends FCF (billion Euros)
The table above covers a three-year period that was considered to be within a period leading up to financial problems. The three years were marked by financial constraints, but the effects on the shares of the company were not affected that much. Over the period, the compound annual growth rate of dividends per share is estimated to be roughly 7.50% (Brealey 1970). The company does not have a dividend policy making the managers decide how much they pay for the profit. The decisions are made in such a way that the cash balance is not strained in the process. There is also need to look at the payout ratios in determining the stability. Averagely the company has paid 70% of earnings over the past decade. The above information provides basic information about the dividend of the share stock of the organization (Johnson 2011).
The above charts also provide a chart analysis of the stock prices for the company. From the date of 31st 2010, December the shares of the enterprise were averaged to be selling at roughly 28.50 Eurocents/ share. For the past five years from this particular date, the shares were estimated to be trading at approximately 70% (Crutchley 2000). These value being a representation of what would be referred to as the less than 5.90% representation of the capital. Investors referred to this as an active type of investment.
The stability of any stock in the market is its ability to appear appealing. Under this instance, the shares would best fit this description. The shares keep rising, and the cash flow increases gradually. The stock took the risk of the unexpected and accounted for in a business. They stay their ground with minimum risks in its trade in the market making it very appealing to the risk-averse members. The movement of the FTSE shows progress in the shares of the companies under these classifications. The enterprises that are registered under this category goes for an increase in the shares yearly. There are progress and increase in the shares affected by different financial factors affecting the economy. The instability of the economy in the past five years has also been translated to the dividend that they are paid. Investment in the Unilever shares is a grantee of safety that is being offered by the company. The company goes for maximum profitability in despite the economic factors. That is to say, the economy of a country has some very significant effects on the share prices and the payment of the dividends (Donaldson 1999). The Unilever Company has a consistent dividend payment system that is not interfered with by the changes in the economic stability. The company deal with the selling of its products in the market and the changes in the market value of money has some great impact on their products. The people who feel the pinch in the process are the shareholders who have to take home a dividend that is less the previous year. Unilever tries to maintain a performance track of delivering of a maximum profit but consistently delivering on an increase in the dividend yearly (Easterbrook 2000).
Comparing JNJ with Unilever dividend
By the December 2007, the JNJ shares were closed at a price of roughly $67. By the end of year 2012 that is five years, later the shares were estimated to end at 70% (Fenn 2001). The figures below of the JNJ stock show that the stock prices appreciation is roughly 1% per annum.
|Johnson & Johnson
From the above data, it is clear that the numbers showed that the prices were constant for five years (Gugler 2003). Looking at the above figure it is clearly shown that the figures are consistent. The dividends, on the other hand, are showing to increase by 1% yearly. The five years saw the capita figure to remain constant. The five years of observations were mostly affected by the economic strains. Most of the country’s economy was affecting the buying and the selling of the shares. Most investors in different circles refer to this share stock as “dead money”. That, however, does not translate to the stock being an inadequate investment. The paper presents the aspect of risk-averse stock by looking through the price value of stock (Lane 2001).
The year-end of the stock values for the last five years are as follows: 2007=$67, 2008= $60, 2009=$64, 2010=$62, 2011=$66 and 2012=$70 (Jensen 2000). The dividends that are paid within the same time are as follows: 2008= $1.795, 2009=$1.93, 2010=$2.11, 2011=$2.25 and 2012=$2.40 (La Porta 2000). The above data shows that the share price might have been stagnating, but the dividends increased. The growth rate can be estimated to be roughly 8% per year (Lynch 2000).
Take a situation where an investor takes $1000 worth of Johnson & Johnson shares. This is done at the beginning of 2007. The amount that it would have purchased would be roughly 14.9 shares. By the end of the year 2008, the dividend that would have been collected would have amounted to $26.80 (La Porta 2000). Taking the same trend by the end of 2008 the amount of increased the additional shares of roughly 0.45 shares. Should the investor choose to invest an additional $1000, the shares he owns grows to 16.7 shares (Long 2010). In 2009 the collection of $62 in dividend a figure that is roughly twice the first year. The end of the year 2012 also saw the owners have a rough estimated 101 shares of the JNJ investment stock. Looking at these hypothetical figures it is clear that despite the stock have a constant tally the returns show that it is profitable. The stocks of JNJ are valuable when bought (Osei 1998).
The share prices of the Unilever products make the movement of stock not to jump a significant figure. The shares as presented did not make high jumps in the previous years. The stock has moved roughly 10% and has since moved down in the one-year low recently. The past five years have seen many countries experiencing inflation. The value of the dollar has been of considerable influence on the declining share prices. Part of this decline is due to the dollar. That translates to the value of the Euro in the market. In instances where the Euro is presented to go down, it provides an opportunity for the US investors to buy Unilever at a more attractive price range (Myers 2010).
Looking at the first half of the year 2014 the company made a recording of roughly 0.97 Euros in the EPS. A figure that showed an increase of 0.14 Euros recorded in the previous year. The figures, however, are indication of the gains from the disposal of the US paste sauce business. The earnings per shares are estimated to be roughly 2% per share in that year. In the year 2013 the companies full- year EPS stood at 1.66 dollars. The projections by different investors predict an improvement in the following years. The year 2014, it improved to 1.75 Euros per share in 2014 and 17.2 Euros in the year 2015 (Myers 2001). Analysts are quoted as having said that the figures are projected to grow further to 1.58 Euros per shares in 2013 to 1.6 Euros in 2014 and 1.74 Euros in 2015 (Johnson 2007).
The company has taken a unique way of paying their dividends. It is considered as the only company in Europe that pays quarterly dividends. The ordinary shares have increased in the year 2014 to register an increasing 6% that would translate to 0.285 Euros. The payout ratio of the company is estimated to be roughly 1.124 Euros. This would be in correspondence to a yield of 3.8%. In a situation where the Q32014 stock is concerned the dividend was fixed at $0.3637. The whole year the company pays $1.4871, which is in relation to the yield of 3.7% of the Unilever returns (Ripley 2000).
The company is in a better position to pay more of its dividend compared to the JNJ stock. Both companies show an increase in its stock value, but the figures will always be different. The stagnant stock of the JNJ can be compared to the Unilever share. Very little is gained by the purchase of the JNJ stock (Rozeff 2010). That is regardless of a boom or depression in finance. The Unilever products make their stock be considered in a different light. The products that are in relation to the stock show a different characteristic to the JNJ stock. The company can record an increase in the figure that is paid in dividend with a change in the economy. However, both stocks are profitable only that they can never compare (de Mortanges 1998).
The influence of the dividend policy of the attraction of clients
The buying of shares by investors is dependent on so many factors. There are those who are more inclined to the fact that they have a absolute nature of running a business. The company would make a decision about what stands out in the particular shares that they would like to purchase. Under the above discussion, there are two types of shares (Short 2002). Some investors prefer reward to saving when purchasing shares. They would attach themselves to a particular shares or company with the intent of making more than they have invested in the shares. There are those who buy shares as a long-term investment. They are never after rewards that are short lived. The Unilever shares and the JNJ have different characteristics that would attract different customers and shareholders. For an investor buying shares, there is that likelihood that the two companies would attract people of the different nature (de Mortanges 1998).
Take the JNJ shares for starters. The company is considered to have had a stagnant shares price for the past five years. The dividend of the company is rated to have increased by 1% for the past five years. The shares are never affected by economic changes. Shareholders will always earn the same amount regardless of the nature of the economy. Investors who would go for this type of investment are the long-term investors. People who are not after gaining money quickly rather saving for the long run. The community in question that buys this type of shares is risk-averse. They rather gain at a slower rate that risk losing everything in one instance. The shares are not dead there are profits in buying the shares only that the shares does not make excessive profits in one financial year.
The Unilever shares are different. The company has a very vibrant shares compared to JNJ shares. The company has a share that is affected by the increasing and dropping economic trends. With an increase of the share prices, the strength of the currency increased or the value of the Euro increased making investors from both ends to purchase more products. The company has a stock value that was estimated to have recorded an increase pay of dividend at $1.4871. The value of the stock of this company is stronger and earns more dividends depending on the economic factors and conditions (Johnson 2011).
The types of investors that are invited, in this case, are the risk takers. These people are interested in ensuring that they maximize their interests. The company ought to ensure that they are shares are stable and earning profits. The number of shares who invest will only be keen on the profitability for that particular financial year and never the long-term benefits.
Dividend distribution acts as a way of determining the strength of the company. Many investors consider companies that pay dividends to be stable, unlike the companies that do not pay. The announcement by the company about the increase in dividend that is being paid would result in increased number of investors. The concept has been debated, and so many people disagree. The provision of private information acts as way of showing the future of the company. An increase in the payment of the dividend amount shows the stability and bright future of a company. In this case, the two companies JNJ and Unilever are considered to be very stable and attract many customers in the process.
Agency theory in an organization is in reference to the way an organization determines the work. The organization, in this case, would be assigning work to a different party on its behalf. Take the example where the shareholders in a corporation delegate agents who would be managers of the company to perform certain tasks. The task in question would either be one that can be done willingly by the shareholders and those that are not clear to his knowledge. The assumption that is made in this instance is that both parties are in this relationship due to the self-interest. The assumption does not make any of the agents to have prior knowledge of how to evade any inherent conflict. There is a likelihood that the agents will look for ways to benefit at the expense of the organization (Osei 1998).
There are standards that have been established to iron out these differences. “Agency loss” is a common term that has been used to this effect. It stands for the difference between the best possible outcome for the principal and penalty of the acts of the agent. Take a situation where the agent acts in the interest of the principal then the agency loss is zero. However the more the agent acts entirely on their self-interest the loss becomes higher and higher.
The agency theory makes the conclusion that the loss is minimized when two statements are true. The principal and the agent have a common interest. The second supporting theory being that the principal has prior knowledge of the consequences of the actions of the agent. The biggest challenge in this theory has been the assumption of self-interest in an organization. The agent is acting on his or her benefit at the expense of the principal. That becomes the greatest challenge in this theory (Osei 1998).
The agency loss would determine the number of investors in a particular company. People are fearful of fraudulent companies, and any cases that would be related to fraud make many companies have less investor. In the stock exchange, shares of such companies are characterized by a drop in the stock value at a very fast rate. They are referred to as faulty shares. The company is losing stock value because the agents were not acting in the best interest of the whole organization. Such instances see either the manager taken to court for fraud charges or the company has its accounts frozen (de Mortanges 1998).
The company is dependant of the funding by the shareholders. They are dependent on the shares that they are selling and the dividend that they make yearly. That amount is equivalent to paying the expenses incurred in running the company and making such profits. The power of control lies with the shareholders and the board of governors. All the employees the managers and the accountants have been directed to take a cue from the shareholders. Nothing is done without their say so and they advises the managers on how the operations in the organization are done. Their actions affect the shares and the dividend earned by the shareholders.
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