How does price earnings (P/E) ratio affect the dividend policy of a business?

Every business set up for the purpose of making profit is primarily interested in reaching and maintaining a high level of performance where revenue exceeds expenses. It measures its performance in terms of of the price of its shares, dividends and number of issued shares.

A business's dividend policy including the stability of the policy, is tied to the business's earned profits, cash flows, prospects of growth and the preferences of shareholders or investors.

Shareholders or investors considering investment options would assess dividend policies and results of shareholder or investor ratios (especially the price earnings ratio) of available businesses before making an investment decision..

The dividend policy indicates the proportion of earned profits a business is willing to pay out and the regularity at which dividends are paid out.

Now note, when a company is not making stable profits, their shares will not yield regular dividends.

What is the price earnings (P/E) ratio?

The price earnings ratio is an investor or stock market ratio that compares the market price of the shares to the earnings per share. This is calculated thus;

Market price/earnings per share.

Earnings per share (EPS) shows the proportion of a business's profit attributable (after deducting tax, minority interest and preference dividends but before considering extra ordinary items) to each common stock (or share) or attributable to issued number of common stock ranking for dividend.

What is a good price earnings (P/E) ration?

There's no fixed rule for determining a good price earnings ratio. Generally, the lower the P/E ratio, the better. Why is it better? Because as the P/E ratio falls, the dividend payout ratio is also lowered.

A lower dividend payout ratio is an indication that a business can pay regular dividends as it would have more retained profits to expand and grow. Dividend investors like a lower payout ratio.

The dividend payout ratio is calculated thus;

Annual dividend per share/ earnings per share (EPS)

9 High yield savings accounts in Nigeria.

High yield savings account in Nigeria Here are nine Nigerian banks known for offering high-yield savings accounts, as of the latest available data. The interest rates can vary, so it’s always a good idea to check with the banks directly for the most up-to-date offers. 1. GTBank (Guaranty Trust Bank) Known for competitive interest rates on savings accounts, including specialized savings products like the GTSave savings account. The GTSave offers a competitive interest rates at 8.175%. 2. Access Bank Offers a variety of savings products with attractive interest rates, especially on their Access Bank High Interest Savings account. Access bank premier savings accounts attracts interest rate of 8.175%p.a paid monthly. 3. Zenith Bank Provides various savings products with good returns, including the Zenith Bank High Yield Savings account. Zenith bank has an account called Save4Me. Save4Me is a savings account with a higher interes...

Learning Curve Theory

A worker is likely to gain experience, become more efficient and faster as they carry out a repeated performance of a job task. Human beings improve skills, gain experience, exposure and specialize as they repeat the performance of a particular task. This is known as the learning curve effect. A worker with the no previous experience and knowledge is untried the first time they perform a new operation. As the worker repeats the operation and becomes more familiar with it, their labor efficiency increases and their labor cost per unit decreases. After the passage of time, the regular rate of decline in cost per unit is established and used as a basis to predict future labor cost.. The learning process begins at the point the first unit comes off from the production line. And each time cumulative production is doubled, the average taken to produce a unit of cumulative production is a percentage of the average time of the previous cumulative production. What is the learning curve theory? ...

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