The following firms are listed on the Johannesburg Stock Exchange (JSE) and operate in the financial services sector. Assuming you are the Chief Investment Officer (CIO) at a leading investment firm and have determined the amount of suplus cash for the year, after the investment generated by each firm and the dividend paid for the year as shown in Table 4.1. The average retum on equity for the last 5 years is reported below and this is sustainable for the foreseeable future Rmillion R million Surplus Cash for Dividends paid ROE Beta the Year in the Year ABSA Bank Limited 60 40 0.80 Barclays Africa Group Limited 65 17 18 1.30 Blue Financial Services Limited -20 10 1.25 First Rand Limited 25 17 0.90 RMB Holdings Limited - 10 13 16 1.05 Table 4.1 -NA-00 The risk-free rate of return is 7% and the average return on the market was 12%. Page 5 of 8 Required: 4.1 As an institutional investor, what influence would you try to exert on management regarding the dividend? (Motivate your decisions to influence management with relevant calculations) (10 Marks) 4.2 With the aid of relevant examples critically discuss ANY FIVE (5) factors affecting dividend policy under the following headings: (15 Marks) 4.2.1 legal constraints (3 Marks) 4.22 growth prospects (3 Marks) 4.2.3 dividends payments (anterim and final) (3 Marks) 4.2.4 market consideration (3 Marks) 4.2.5 the clientele effect (3 Marks) 42 signalling (3 Marks) 4.2.7 agency considerations (3 Masks) The following firms are listed on the Johannesburg Stock Exchange (JSE) and operate in the financial services sector. Assuming you are the Chief Investment Officer (CIO) at a leading investment firm and have determined the amount of suplus cash for the year, after the investment generated by each firm and the dividend paid for the year as shown in Table 4.1. The average retum on equity for the last 5 years is reported below and this is sustainable for the foreseeable future Rmillion R million Surplus Cash for Dividends paid ROE Beta the Year in the Year ABSA Bank Limited 60 40 0.80 Barclays Africa Group Limited 65 17 18 1.30 Blue Financial Services Limited -20 10 1.25 First Rand Limited 25 17 0.90 RMB Holdings Limited - 10 13 16 1.05 Table 4.1 -NA-00 The risk-free rate of return is 7% and the average return on the market was 12%. Page 5 of 8 Required: 4.1 As an institutional investor, what influence would you try to exert on management regarding the dividend? (Motivate your decisions to influence management with relevant calculations) (10 Marks) 4.2 With the aid of relevant examples critically discuss ANY FIVE (5) factors affecting dividend policy under the following headings: (15 Marks) 4.2.1 legal constraints (3 Marks) 4.22 growth prospects (3 Marks) 4.2.3 dividends payments (anterim and final) (3 Marks) 4.2.4 market consideration (3 Marks) 4.2.5 the clientele effect (3 Marks) 42 signalling (3 Marks) 4.2.7 agency considerations (3 Masks)
