Example: Expected Dividend based on target payout ratio approach:

Last year Buckeye Inc, had earnings of $$3\mathrm{.}50$ per share and paid a dividend of $$0\mathrm{.}70.$ In the current year, the company expects to earn $$4\mathrm{.}50$ per share. The company has a $35\%$ target payout ratio and plans to bring its dividend upto the target payout ratio over a period of $5$ year. Calculate the expected dividend for the current year.