Comparison Of Dividend Payout Ratios Between BHP Billiton And ANZ
CAPM Beta Lives for Expected Returns
|
Particulars |
Value |
|
Expected return |
12.00% |
|
Weight A |
69.86% |
|
Weight B |
30.14% |
|
Variance |
213.33 |
|
Stdev |
14.61 |
|
Particulars |
Value |
|
Expected return |
12.00% |
|
Weight A |
57.69% |
|
Weight M |
42.31% |
|
Variance |
147.50 |
|
Stdev |
12.14 |
|
Particulars |
Value |
|
Expected return |
12.00% |
|
Weight B |
55.65% |
|
Weight F |
44.35% |
|
Variance |
83.31 |
|
Stdev |
9.13 |
|
Particulars |
Value |
|
Expected return |
12.00% |
|
Weight M |
68.09% |
|
Weight F |
31.91% |
|
Variance |
37.08 |
|
Stdev |
6.09 |
|
Particulars |
Value |
|
Beta A |
0.7 |
|
Beta B |
1.2 |
|
Risk free rate |
5.60% |
|
Market return |
15% |
|
Market premium |
9.400% |
|
CAPM A |
12.18% |
|
CAPM B |
16.88% |
The overall CAPM expected returns an actual return of asset A and B is relatively not same, which indicates the changes in perception of investors in the company progress. The overall asset value of A and Bis relatively higher in CAPM, while the actual value in much lower, which could allow investor to generate returns from investment. In this context, Liu, Kolari and Pynnonen (2018) stated that companies with the help of CPM value can detect the minimum returns, which could be provided from an investment.
|
BHP Billiton |
2006 |
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
|
Net profit after tax |
10,534.00 |
13,496.00 |
15,962.00 |
6,338.00 |
13,009.00 |
23,946.00 |
15,532.00 |
11,075.00 |
15,224.00 |
2,878.00 |
(6,207.00) |
6,222.00 |
|
Earnings per share |
173.20 |
229.50 |
275.30 |
105.60 |
228.60 |
429.10 |
289.60 |
204.40 |
256.50 |
65.50 |
(120.00) |
110.70 |
|
Dividend per share |
32.00 |
38.50 |
56.00 |
82.00 |
83.00 |
91.00 |
110.00 |
114.00 |
118.00 |
124.00 |
78.00 |
54.00 |
|
Dividend pay-out ratio |
18.48% |
16.78% |
20.34% |
77.65% |
36.31% |
21.21% |
37.98% |
55.77% |
46.00% |
189.31% |
-65.00% |
48.78% |
The dividend policy of BHP Billiton is to provide dividends to the investors as and when the overall net income of the company grows. However, during difficult times the company has provided higher dividend pay-out ratio to reduce the negative impact on its share price. The company recently in 2016 paid dividends, while making a loss from operations, which mainly rolled the dividend pay-out ratio negative (Bhp.com 2018).
However, from the evaluation of the dividend pay-out ratio of ANZ the company has been maintaining dividend pay-out ratio from 60 to 80, which has helped the company to improve its market share. Nevertheless, in 2016 despite the overall reduction in net profit the company’s dividend pay-out ratio was higher than 80 (Shareholder.anz.com 2018).
From the overall comparison the divided pay-out ratio of ANZ is relatively higher than BHP, which is due to the impact of industry and work culture. The main reason behind the changes in dividend policy is the risk and returns attributes of the both companies. The BHP company relevantly falls under mining and petroleum, which needs high level if cash to continue its operations. On the other hand, the ANZ bank is related to financial institutions, which needs to maintain the level of dividend policy for acquiring the required capital from the market to conduct its operations.
|
BHP Billiton |
2015 |
2016 |
2017 |
|
Net profit after tax |
2878 |
-6207 |
6222 |
|
Earnings per share |
65.5 |
-120 |
110.7 |
|
Dividend per share |
124 |
78 |
54 |
|
Dividend pay-out ratio |
189% |
-65% |
49% |
|
ANZ Bank |
2015 |
2016 |
2017 |
|
Net profit after tax |
7507 |
5720 |
6421 |
|
Earnings per share |
271.5 |
197.4 |
220.1 |
|
Dividend per share |
181 |
160 |
160 |
|
Dividend pay-out ratio |
67% |
81% |
73% |
The change in dividend policy of BHP and ANZ was witnessed in 2016, where both the companies despite performing poor was able to provide higher dividends to their shareholders. The overall performance of the company can be evaluated in the above table, where reduction in net profit after tax increased the dividend pay-out ratio. Kajola, Adewumi and Oworu (2015) stated that the overall evaluation of dividend pay-out ratios allow investor to understand the current dividend policy adopted by the company. The decision regarding changes in dividend policy is a viable move, as overall financial position of the company has deteriorated in the financial year, which might negatively affect its share price valuation.
The overall share price movement of BHP Billiton mainly indicates a positive movement after the declaration of dividend and annual report. This relevantly portrayed the overall dividend policy of the company and the losses, which incurred during the period., However, due to the change in dividend policy the overall negative impact on share price of the company substantially reduced. The share price movement after the change in dividend policy was mainly positive and increased market valuation of the company.
However, the increment in dividend policy ratio of the company for 2016 drastically reduced the overall share price, while after the announcement the spike in shares could be seen. This is due to the adoption of changed dividend policy, where the company provided higher dividends even after obtaining low net profit after tax. The positive increment in share value of ANZ is also seen after the disclosure of dividend policy, which allowed the company to increase their share price even with low financial results.
Reference and Bibliography:
Bhp.com. (2018). [online] Available at: https://www.bhp.com/-/media/documents/investors/annual-reports/2017/bhpannualreport2017.pdf [Accessed 18 Apr. 2018].
Kajola, S.O., Adewumi, A.A. and Oworu, O.O., 2015. Dividend pay-out policy and firm financial performance: Evidence from Nigerian listed non-financial firms. International Journal of Economics, Commerce and Management, 3(4), pp.1-12.
Liu, W., Kolari, J.W. and Pynnonen, S., 2018. CAPM Beta Lives for Expected Returns. Department of Finance.
Market Index. (2018). S&P/ASX 50 – Shares Prices & Charts. [online] Available at: https://www.marketindex.com.au/asx50 [Accessed 18 Apr. 2018].
Renneboog, L. and Szilagyi, P.G., 2015. How relevant is dividend policy under low shareholder protection?. Journal of International Financial Markets, Institutions and Money.
Shareholder.anz.com. (2018). Annual Report Archive | ANZ Shareholder Centre. [online] Available at: https://shareholder.anz.com/pages/annual-report-archive [Accessed 18 Apr. 2018].