Professional Documents
Culture Documents
Term Paper On Paramount
Term Paper On Paramount
on
Dividend Policy of
‘Paramount Textile Ltd.’
East West University
Term Paper
On
Submitted To:
Dr. Tanbir Ahmed Chowdhury
Professor, Department of Business Administration
&
Director, Executive Development Centre, EWU
Submitted By:
S. M. Asfikur Rahman
2019-2-95-059
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Letter of Transmittal
Subject: Submission of the report on ‘An Appraisal of Dividend Policy of Paramount Textile
Ltd’
Dear Sir,
It is my pleasure to submit this report entitled “An Appraisal of Dividend Policy of Paramount
Textile Ltd” which was assigned to me as a requirement of Corporate Finance course.
I have tried my level best to make an enriched report and now I am glad to submit you this for
better judgment. The writing of this report was a great experience as it provided me with
exposure to the real life and practical experience.
Thank you for your guidance and constant supervision to fulfill this report. If you need further
clarification, please inform me.
Sincerely Yours,
S. M. Asfikur Rahman
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Table of Content
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3.5 Business Ethics 21
3.6 Reward & Recognition 22
Chapter 4 An Appraisal of Dividend Policy of Paramount
Textile Ltd
4.1 Paid-Up Capital 23
4.2 Net income After Tax 24
4.3 Retained Earnings 25
4.4 Earnings Per Share 26
4.5 Price Earnings Ratio 27
4.6 Cash Dividend 28
4.7 Stock Dividend 29
4.8 Total Dividend 30
4.9 Dividend per Share 31
4.10 Dividend Payout Ratio 32
4.11 Net Asset Value 33
4.12 Market Value per Share 34
4.13 Glimpse of Paramount Textile 35
4.14 Dividend Policy Followed by Paramount Textile 35
Chapter 5 Findings
5.1 Dividend Relevance or Irrelevance Theory 36
Conclusion 37
Bibliography 38
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Acknowledgement
First of all, I am expressing my deep gratitude to the Almighty Allah who created and nurture us
in this transitory world in this epidemic situation. I also have to put my heartfelt respect and
gratitude for His kindness and help that was provided to me to complete me the report on the
topic “An Appraisal of Dividend Policy of Paramount Textile Ltd”
I would like to thank my course instructor Professor Dr.Tanbir Ahmed Chowdhury for his
excellent cooperation and guidance which has helped me to prepare this report properly. Without
his help this report would be impossible.
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Executive Summary
Paramount Textile Limited is one of the leading textile company in Bangladesh. It is an enlisted
public limited company in the stock exchange and raises their capital from shareholders by
issuing shares. Moreover, this company pays out dividend to shareholders throughout years.
Dividends refer to that portion of a firm’s earnings which are paid out to the shareholders.
Dividend can be two types such as Cash dividend and Stock dividend. In this paper I have
presented two different theory of dividend; Relevance & Irrelevance theory. I have also
presented some factors that affect the firm’s dividend policy. After that I have included different
types of dividend policy that normally firms follow.
In this paper, the dividend policy of Paramount Textile limited is appraised on the basis of 5
year’s data, 2015-16 to 2019-20 and considering different factors such as Paid-up capital, Net
income after tax, Earnings per share, Price earnings ratio, Cash dividend, Stock dividend,
Dividend payout ratio, Net asset value per share, Total dividend, Market value per share,
Dividend per share.
After the analysis we have tried to find which dividend policy Paramount Textile is following.
From those five years’ data, I have also tried to which dividend theory firms practicing. In case
of dividend firm’s dividend payment portion is lower than its retained earnings. Firm is focusing
more on long term capital gain rather than current gain.
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Chapter-1
Introduction
1.1 Origin of the Report
My course instructor Professor Dr.Tanbir Ahmed Chowdhury has authorized me the report as the
partial fulfillment of “Corporate Finance” course requirements. I was assigned to make a report
on “An Appraisal of Dividend Policy of Paramount Textile Ltd” and complete a study that
covers all important factors.
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Chapter-2
The portion of Net Income provided or distributed to common stock holders is called dividend.
Dividend policy of a firm mainly depends on which dividend theory the firm is following.
Dividends refer to that portion of a firm’s earnings which are paid out to the shareholders.
Dividend can be two types such as Cash dividend and Stock dividend. In cash dividend
shareholders get a certain percentage of cash of the net income whereas, a stock dividend is the
payment to existing owners of dividends in the form of stock.
A dividend policy is the policy a company uses to decide how much it will pay out to
shareholders as dividends from retained earnings. It is a part of net income distributed among the
shareholders. Whether and what amount to pay as cash dividend is decided by the board of
directors in (AGM) Annual General Meeting.
In the date of annual general meeting which is commonly known as record date; the corporation
declares the payment date on which dividends will be paid to those shareholders who were
registered in ex-dividend date.
Common stock: Dividend is not fixed and fluctuates by the net income.
Preferred stock: Dividend is fixed and mentioned when it is issued. Preferred stock can
be classified in two types further.
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Non-Cumulative preferred stock: Dividend payment is mandatory if company makes
profit. But if there is loss, dividend payment is not required for that year.
Dividend paid by a firm should be the amount left over after all acceptable investment
opportunities have been undertaken.
There’s a direct relationship between a firm’s dividend policy and its market value. The bird-in-
the-hand theory, hypothesized independently by Gordon (1963) and by Lintner (1962) states that
dividends are relevant to determining of the value of the firm. This theory suggests that investors
see current dividends as less risky than future dividends or capital gains. The determinants of the
value of a firm’s cost of equity financing are the dividends the firm is expected to pay to
perpetuity, the expected annual growth rate of dividends and the firm’s current stock price.
Where: The return on equity to equity investors (k), the forward looking yearend dividend
payout (d), the current stock price of the firm’s stock (p), expected future annual growth rate of
the firm’s dividend (g).
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The dividend yield and the future growth of the dividends provide the total return to the equity
investor. This model insists that dividend yield is a more important measure of the total return to
the equity investor than the future growth rate of the dividends (which is the rate at which the net
earnings and the capital gains of the firm will grow at in the future). Future growth, and hence
capital gains cannot be estimated with accuracy and are not guaranteed at all as firms might lose
even their entire market value in the stock exchange and go bankrupt. If a firm does not pay
dividends therefore, its forward looking market value is severely affected by the uncertainty
surrounding the possibility of the investors’ ever booking the capital gains.
The main proponents of this view are Franco Modigliani and Merton Miller (1958, 1961). Their
key premise is that to investors, payment of dividends is irrelevant as investors can always sell a
portion of their equity if they need cash. Therefore, two firms of the same industry and scale
should have the same value even when one of the firms pays dividends and the other one does
not. The Modigliani and Miller Approach & the residual theory of dividends are the main
theories supporting the dividend Irrelevance theory. They argue that the firm’s value is
determined by its basic earning power and risk of its assets or investments.
Modigliani and Miller pinpointed certain conditions which must hold for their hypothesis
to be valid:
There is no uncertainty about the firm’s future prospects, and therefore all investors are
able to forecast future prices and dividends with certainty and one discount rate is
appropriate for all securities over all time periods.
The capital markets are perfect, i.e. investors behave rationally, information is freely
available to all investors, transaction and floatation costs do not exist, and no investor is
large enough to influence the price of a share.
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The firm has a fixed investment policy.
Taxes either do not exist or there is no difference in the tax rates applicable to both
dividends and capital gains.
M & M further argue that a clientele effect exists, the argument that a firm attracts shareholders
whose preferences for the payment and stability of dividends correspond to the payment pattern
and stability of the firm itself. M & M’s theory suggests that in a perfect world value of the firm
is unaffected by the distribution of dividends. However, studies have shown that large changes in
dividends do affect share price. Increases in dividends result increased share price, decreases in
dividends result decreased share price. These effects are attributable to the informational content
which is provided by the dividends of a firm with respect to future earnings that causes owners to
bid up or down the price of the firm’s stock. An increase in dividends is viewed as a positive
signal, and investors bid up the share price. A decrease in dividends is viewed as a negative
signal that causes a decrease in share price as investors sells their shares.
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● Expect higher dividend and capital gain.
● Normally are institutional investors
Company attracts those investors or shareholders who are interested to maximize the basic
earnings power, stability of dividends & growth of the firm.
The dividend payout ratio indicates the percentage of each TK earned that is distributed to the
owners in the form of cash.
● If firm earns net loss than they do not have to pay any dividend in that year
● With this policy, the firm establishes that a certain percentage of earnings is paid
to owners in each dividend period
● Firms that use this policy increase the regular dividend once a proven increase
in earnings has occurred.
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2.6.3 Low regular and Extra Dividend Policy
A dividend policy based on the paying a low regular dividend, supplemented by an additional
dividend when earnings are higher than normal in a given period.
● By establishing a low regular dividend that is paid each period.
● The extra dividend will pay in a regular time interval if retained earning
condition is good.
A stock dividend is the payment, to existing owners, of dividends in the form of stock.
➢ Firms pay stock dividends as a replacement for or a supplement to cash dividends.
➢ After the dividend is paid, the per-share value of the shareholder’s stock decreases in
proportion to the dividend in such a way.
The shareholder’s proportion of ownership in the firm also remains the same, and as long as the
firm’s earnings remain unchanged.
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The Company's Viewpoint: Firm’s find the stock dividend a way to give owners something
without having to use cash. When a firm need to preserve cash to finance rapid growth, a stock
dividend is used. When the shareholders recognize that the firm is reinvesting the cash flow so as
to maximize future earnings, the market value of the firm should at least remain unchanged.
A method commonly used to lower the market price of a firm’s stock by increasing the number
of shares belonging to each shareholder.
Firm repurchase the firms outstanding common stock from the marketplace. Desired effects of
stock repurchase are that they either enhance shareholder value or help to discourage an
unfriendly takeover.
(1) Reducing the number of shares outstanding and thereby raising earnings per share,
(2) Sending a positive signal to investors in the marketplace that management believes that
the stock is undervalued, and
(3) Providing a temporary floor for the stock price, this may have been declining.
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2.8 Factors affecting dividend policy
A firm’s dividend policy is influenced by a large number of factors. Some factors affect the
amount of dividend and some factors affect types of dividends. The following are some major
factors that influence the dividend policy of the firm.
Internal Constraint
Here firm can declared dividend without borrowing. The firm’s ability to pay cash
dividends is generally constrained by the amount of excess cash available rather than the
level of retained earnings which to charge them.
Growth Prospects
The firm’s financial requirements are directly related to the degree of assets expansion
that is anticipated.
Little or no growth firms may nevertheless periodically need fund to replace or
renew assets. So dividends will be more in these firms.
If the firm is in a growth stage, it will have to depend heavily on internal financing
and it will pay minimum dividends.
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Legal Constraints
An earnings requirement limiting the amount of dividends to the sum of the firm’s most
present & past retained earnings is sometimes imposed. However, the firm is not
prohibited from paying more in dividends than its current earnings.
Contractual Constraint
Often the firm’s ability to pay cash dividends is constrained by certain restrictive
Owner Considerations
In establishing a dividend policy, the firm’s primary concern should be to maximize owner
wealth. The firm must establish a policy that has a favorable effect on the wealth of the majority
of owners.
Tax status:
If more investors are in high tax bracket than dividend is low and RE high
If more investors are in low tax bracket than dividend is high RE is low
A second consideration is the owner’s investment opportunities:
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A firm should not retain funds for investment in projects yielding lower
returns. If it appears that the owners have better opportunities externally,
the firm should pay out a higher percentage of its earnings.
Future prospect:
If future prospect is bright than dividend will be lower and RE will be
higher
If future prospect is not good than dividend will be higher and RE will be
lower
Market considerations
Wealth of the firm’s owners reflected by the market price of share. Market prices of
shares are influenced by the dividend policy.
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Chapter-3
Overview of Paramount Textile Limited
Paramount group is one of the most successful groups of companies rapidly expanding national
and international Trade and Industry which has grown significantly since its beginning with
Sunrise Chemicals in 1983. They have focused on world class infrastructure, best-in-class
technology, uncompromising quality standards and dynamic product innovation. In target of
serving Paramount industries have been diverting business to various industries and sectors;
achieved immense attention.
Paramount Textile was set up in 2006 and commenced its commercial production in 2008. The
registered office is located at Navana Tower (Level-7), Gulshan C/A, Dhaka-1212, Bangladesh
and the industrial unit located at Gilarchala, Sreepur, Gazipur, Bangladesh. It is built on an
extensive area of 40 acres with BDT 2000 Million authorized capital. They are committed to
quality and customer service. They have the most qualified team of engineers and competent
research and development departments. Paramount manufactures a diversified range of high
quality yarn & solid dyed and printed woven fabrics. With the inputs of a professionally 100%
local management, making them one of the largest and most modern woven fabric manufacturers
in Bangladesh. As recognition of our performance, Paramount Textile has been awarded the
“National Export Trophy several times since its inception but in 2013-2014 the company has
selected in Gold category. As recognition of performance to ensure governance within the
company; the company has been awarded by various national and international organizations.
Their vision has emerged to become one of the leading and most trusted yarn dyed fabric
manufacturer attaining sustainable development through competitive pricing, innovating new
ideas and designs and providing on time delivery in a systemized manner. They focus on
environmentally friendly methods and promote safe working conditions for our workers. We
continue to minimize production hazards for our employees and we are always looking to create
equal employment opportunities. This is reflected by the expanding work force in our
manufacturing facility. Our aim is to provide sustainable growth opportunities to everyone and
create jobs in Bangladesh
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3.1 Strategic Sister Concerns
3.2 Mission
Paramount Textile is committed to perfection in product quality, establishing state-of-the-art
technology, focusing on cost effectiveness through competent workforce for retaining customers’
satisfaction and ensuring eco-friendly environment to achieve industry dominance.
3.3 Vision
To become the leading and most trusted yarn & solid dyed and printing fabric manufacturer
attaining sustainable development through competitive pricing, incorporating new ideas &
designs and providing on time delivery through efficient manner.
3.4 Values
Quality:
Paramount Textile Limited always strives to provide the best possible quality for their products
and services in order to meet and exceed customer’s expectation.
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Customer Focuss
Paramount Textile Limited’s main focus is always their customers. They are always to provide
the finest products and services to their customers in order to attract and retain customers.
Fairness
Paramount Textile Limited always attempts to maintain fairness in what they do and produce.
This helped them to gain customer’s faith and confidence and also to operate successfully in the
market with their competitors.
Transparency
Paramount Textile Limited maintains transparency by providing the desired goods and services
to their customers and sharing their goals with their employees.
Continuous Improvement
Paramount Textile Limited always attempts to make improvements in their products and
services in order to meet customer’s demands and cope with the current trend. In this way, they
are able to compete successfully in the market in comparison to others providing the similar kind
of products and services.
Innovation
Paramount Textile Limited strongly believes in innovation. As a result, they go for frequent
research and development in order to improve and upgrade their product on a frequent basis.
Business ethics refers to contemporary organizational standards, principles, sets of values and
norms that govern the actions and behavior of an individual in the business organization. PTL
behave towards their stake-holders in the following manner:
Consumer satisfaction.
Creating goodwill
Building strong relationship with Stakeholders
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Survival and growth of business
Healthy competition
Stop business malpractices
Health & Safety Working Environment.
Minimizing Natural & Environmental Damage
To the greater contribution of the National Exports of the country Paramount Textile Ltd.
awarded the National Export Trophy for the financial year 2010-2011, 2011-2012, 2013-14 ,
2014-2015, 2015-2016 & 2016-2017.
In recognition of its commitment to quality and excellence of its services Paramount Textile has
been awarded the International Trophy for Quality from Global Trade Leaders Club, Paris.
For ensuring good governance within the company the company has been awarded “3rd & 5th
ICSB National Corporate Governance Award” from the Institute of Chartered Secretaries of
Bangladesh in Textile & RMG Companies sector
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Chapter-4
An Appraisal of Dividend Policy of Paramount Textile Ltd
In this section the dividend policy of Paramount Textile limited is appraised by considering
different factors such as net income after tax, Earnings per share, Price earnings ratio, Total
dividend, Cash dividend, Stock dividend, Dividend payout ratio, Net asset value per share, ,
Market value per share, Dividend per share. Besides that, the growth rates of 5 years are also
included in this paper.
Paid-up Capital
1,476.95
1,290.47 1,354.99
1,096.41 1,173.16
As in 2015-16, stock dividend was paid, the paid-up capital is same, 1,096.41 million in 2014-15
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& 2015-16. Then it increased on a regular basis & reached to 1,476.95 million with 9% growth
rate in 2019-20.
600
500
400 411.55
300 277.53
200 201.69 224.93
100
0
2015-16 2016-17 2017-18 2018-19 2019-20
Year
Increased net income provides positive signal to the investor. We can see that paramount textiles
net income after tax has increased positively in those five years. It started by 201.69 million in
2015-16 & reached to 224.93 million by 11% growth. From 2015-16 to 2017-18, it remained in
300 million. In the last year, 2019-20, net income after tax increased by 60% & reached to 659
million. So, paramount Textile has increased its profitable situation.
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4.3 Retained earnings
Retained earnings (RE) is the amount of net income left over for the business after it has paid out
dividends to its shareholders. From the net income after tax, some portion is paid as dividend &
some portion is retained for further investment. Dividends can be distributed in the form of cash
or stock. Both forms of distribution reduce retained earnings. Higher retain earning indicate, firm
is containing more reserve for investment & distributing less dividend. On the other hand, lower
retained earning indicate, firm is containing less reserve & distributing more dividend.
1,500.00
Retained Earnings
1,000.00
TK in
million
500.00
-
2015-16 2016-17 2017-18 2018-19 2019-20
Paramount Textile is retaining more year by year. It may be proportional that, as net income
increased so, the growth of retained earnings also increased. In 2015-16 to 2016-17, the growth
was around 7%. But in the year 2018-19 their retained earnings doubled and Last year it
increased almost 4 times of 2016-17. It may be the reason for providing the fund in their recently
investment in printing unit expansion. This higher retained earning indicates that Paramount
Textile is giving less divided to their investors.
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4.4 Earnings per Share
Earnings per share (EPS) are the portion of a company's profit allocated to each outstanding
share of common stock. Earnings per share serve as an indicator of a company's profitability. It
is calculated by subtracting net income from dividend on preferred stock and divide by the
number of shares outstanding.
Earnings per share determines the investor’s investment decision. Higher earnings per share
attracts more investors. Paramount textile ltd has been able to maintain positive return to their
investors. In the first 2 years’ growth rate was more than 4%. It continuously increased in the
next year & reached to 2.15 taka with 12% growth. In the last year 2019-20 Earning per share
increases highly to 4.46 taka by 46% growth.
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4.5 Price Earnings ratio (Times)
The price earnings ratio is the ratio of a company’s stock price to the company’s earnings per
share. Higher growth firms will have higher P/E ratios. Higher risk firms will have lower P/E
ratios.
60
50
40
TIMES
30
20
10
0
2015-16 2016-17 2017-18 2018-19 2019-20
YEAR
From the graph we can observe that the price earning ration is continuously increasing over those
five years. It’s because of the increased earnings per share.
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4.6 Cash Dividend
A cash dividend is money paid to stockholders, normally out of the corporation's current
earnings or accumulated profits. All dividends must be declared by the board of directors, and
they are taxable as income to the recipients.
Cash dividend
16%
14%
12%
Cash dividend
10%
8%
6%
4%
2%
0%
2015-16 2016-17 2017-18 2018-19 2019-20
Year
If we see 5 years’ data, in 2019-20, they provided the highest cash dividend.2016-17 it decreased
by 5%. They provide less cash dividend to provide fund for their investment in another project. It
slightly increased in 2017-18 by 7% & no change in 2018-19, it increased 15% in the year 2019-
20.
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4.7 Stock Dividend
A stock dividend is a dividend payment made in the form of additional shares rather than a cash
payout. Companies may decide to distribute this type of dividend to shareholders of record if the
company's availability of liquid cash is in short supply.
STOCK DIVIDEND
12%
10%
Stock dividend
8%
6%
4%
2%
0%
2015-16 2016-17 2017-18 2018-19 2019-20
Year
Authorized Capital for Paramount Textile is 2000 million. They have already issued 1352
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million shares within 2018-19. For that they are giving stock dividend in a few portions. In 2014-
15 they didn’t give any stock dividend. In 2015-16 to 2016-17 Paramount Textile continuously
paid 10% stock dividend. In the next year they reduced this portion. They gave 5% stock
dividend in the year of 2017-18 & 9% in the year of 2018-19 with 80% growth rate.it again
decreased by 5%.
This total dividend includes both cash & stock dividend. Cash dividend is distributed from the
net income after tax. Though stock dividend is paid in the form of stock, but they carry certain
amount that is added in the paid up capital in the balance sheet.
Total dividend
250.00
200.00
150.00
YEAR
100.00
50.00
-
2015-16 2016-17 2017-18 2018-19 2019-20
YEAR
As Paramount Textile didn’t give any stock dividend in 2018-19 so, this amount is only the cash
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dividend. From 2016-17 to 2018-19 total amount of dividend decreased to 154 million with a
negative growth of 12%. But on the last year, 2019-20, their total dividend increased to 216
million with 40% growth rate. It indicates that in 2019-20 they increased their dividend amount
rather than retained earnings.
Dividend per share (DPS) is the sum of declared dividends issued by a company for every
ordinary share outstanding. It is the total dividends paid out by a business, including interim
dividends, divided by the number of outstanding ordinary shares issued. A company's DPS is
usually derived using the dividend paid in the most recent quarter, which is also used to calculate
the dividend yield.
2.00
Dividend per share
1.50
1.00
0.50
0.00
2015-16 2016-17 2017-18 2018-19 2019-20
Year
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Dividend per share affects investment decision. From 2015-16 to 2017-18 dividends per share is
decreasing continuously. In 2018-19 increased by 33%. But the positive side is that, in the most
recent year 2019-20, dividend per share increased to 2.00 taka per share. As their total dividend
also increased, so their dividend per share also increased in 2019-20.
80.00%
60.00%
40.00%
20.00%
0.00%
2015-16 2016-17 2017-18 2018-19 2019-20
Year
This decreasing dividend payout ratio indicates that Paramount Textile has reduced their
dividend payment over retained earnings. It is continuously decreasing from 2016-17. Paramount
Textiles dividend payout ratio decreased from 78% to 55%. It clearly indicates that the firm has
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reduced their dividend amount & increased their retained earnings amount over those years.
These retained earnings were for the investment in the sister concern of Paramount Textile.
25
Net asset per share
24
23
22
21
20
19
2015-16 2016-17 2017-18 2018-19 2019-20
Year
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Higher net asset values per share indicate the firm’s efficiency. Over those five years, net asset
value per share is also increasing & decreasing. It increased in one year then decreased in
another year. Lowest value was in 2017-18 with 20.78 taka. But in the last two years, 2018-
19&2019-20 the net asset value per share was highest by 24.26s taka per share.
60
50
40
30
20
10
0
2015-16 2016-17 2017-18 2018-19 2019-20
Year
Market value per share is the price in stock exchange. Increased market value indicate that the
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investors are giving more importance for that companies share. In 2015-16, this market value
decreased from 16.95 to 12.41 taka with a negative growth of 27%. But the positive side is that
from 2015-16 market value of Paramount Textile has increased continuously & reached to 57.48
taka in 2019-20.
Particulars Amount
Face/par value 10
Market Value( on 03/04/2020) 48.9
Authorized capital 2000 million
Paid-up capital 1476.95 million
52 Week's Moving Range 41.00-69.00
Market lot 1
Cash dividend % 15% (2019)
Stock dividend % 5% (2020)
Table 14: Glimpse of Paramount Textile Limited
From the above analysis of dividend payment of Paramount Textile ltd, we can understand that
the company is following Constant-Payout Ratio Dividend Policy as they are paying certain
percentage of net income, 7%, 5%, 7% 7%, 15% respectively 2015-16 to 2019-20. Through this
policy a certain percentage of net income will be distributed. Every year dividend amount will
change. If net income is high than dividend will be higher & if net income decreases than
dividend will also decreased. If firm earn net loss than no dividend is possible to pay.
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Chapter-5
Findings
After the analysis of the dividend policy of Paramount Textile limited, we have found the
following findings:
As we know our stock market is imperfect and inefficient, the investors of Paramount
Textile Ltd. were very much eager to receive the future gain rather than current dividend.
During 2015-16 to -2019-20, the net asset value per share of Paramount Textile Ltd. was
fluctuating which adversely affected the share price of the company.
Paramount Textile Ltd is keeping more retained earnings over the years.
Though the firm is giving continuous cash & stock dividend, the percentage is very low.
As company mostly focused on retained earnings, so it sent a signal to the investors that
the future prospect of company is bright.
From beginning to present, the company never offered right share to its investors. It also
helps us to prove that PTL follows irrelevance theory.
The company is mostly conscious about the long term investors who are concerned about
the capital gain not about the current dividend.
Dividend pay-out ratio of Paramount Textile Ltd is decreasing constantly & reached to
24%.
After analyzing those factors and the table above, it can be said that, Paramount Textile limited is
practicing the dividend Irrelevance theory because the company is providing 24% dividend
from total earnings. Other portion is kept for retained earnings & its continuously increasing.
Their retained earning has increased for those five years. Though they are providing constantly
cash & stock dividend, their portion is very low.
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Chapter 6
Conclusion
In this paper, the dividend policy of Paramount Textile Ltd is appraised and it can be said that,
the company follows dividend irrelevance theory and the Constant-Payout Ratio Dividend
Policy. The present market performance of the company is good in visible scene. Its Cash &
stock dividend portion is decreasing. As we mention earlier that the dividend policy that is
maintained by the committee is for those who are risk taker. In finance one of the main principal
is that high risk leads to high return, so Paramount Textile & investors are looking for future
capital gain.
Their net asset value per share is not in a good condition. They have collected more fund from
equity. They are providing low dividend & maintaining more retained earnings to provide the
fund to their other sister concern. Their market value per share is increasing. It may be attractive
towards risk taker investment as Paramount Textiles earning per share is increasing. Paramount
Textiles dividend per share is fluctuating & dividend payout ratio is constantly decreased. In the
last year it was decreased by 54%.
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Bibliography
Scott Besley & Eugene F. brigham, Essential of Managerial Finance. South Western
Thomson Learning 2015
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