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Q4: An UK-based multinational pharmaceutical company - Glaxosmithkline is operating in Bangladesh. Its parent company owns 82% shareholding of the Bangladeshi subsidiary, whereas institutions in
Q4: An UK-based multinational pharmaceutical company - Glaxosmithkline is operating in Bangladesh. Its parent company owns 82% shareholding of the Bangladeshi subsidiary, whereas institutions in Bangladesh own 16% and general public owns around 2% shareholding. The has a stable cash reserve and has paid 500%, 550% and 530% dividend respectively in the last 3 years. Dividend rate declined last year due to negative profits in the last year (2019) due to higher expenses paid to pay salaries and decommissioning of pharmaceutical division. In this year-2020, they expect a turnaround of profits and expect higher profits. After the company declared 530% profit on 25.02.20- from 25.02.20 declaration date to record date of 16.03.20, their share prices increased around 8%. During the same period DSE Broad Market index return decreased 19%. Given the COVID19 situation with a possible global recession, do you think they should pay higher dividends than 530% despite profit increase? Show your reasons. (Min 2 pages) - [clue: use Factors behind Dividend Policy topic] 5
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