The following summary of the payout, dividend yield, and earnings per share ratios is available for five years ended December 31 for TransAlta Corporation:

Instructions
(a) What are some possible reasons that TransAlta's dividend payout ratio increased from 91.5% in 2008 to 129.8% in 2009 at a time when the earnings per share fell from $1.18 per share to $0.90 per share?
(b) Why do you think that TransAlta continued to pay dividends in 2012 in a year when it reported a loss per share? Note there is no payout ratio available in 2012 because of the loss incurred that year.
(c) Why do you think that TransAlta's dividend yield increased from 5.5% in 2011 to 7.7% in 2012 at a time when the earnings per share fell from a profit of $1.31 per share to a loss of $2.61 per share?
(d) If you were an investor looking for dividend income, would you be happy with TransAlta's dividend policy? Explain.

Transcribed Image Text:

Dividend Yield 4.4% 4.9 ngs per Share Payout Ratio 91.5% 129.8% 125.1% 66.9% n/a Earni 2010 2011 2012 $1.18 0.90 1.16 1.31 (2.61)