GainesBoro Case

Jun 29th, 2015
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• Enormous growth potential, in domestic and international markets The issue faced by the company

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GainesBoro CaseDividend Policy[Type the company name]Group 2GAINESBOROGainesboro Case Analysis- Conventional industry: Machine tools manufacturing- Historically strong earnings and regular dividends- 25% of revenue- New industry: CAD/CAM software industry- Expensive restructuring- Enormous growth potential, in domestic and international marketsThe issue faced by the company- Two expensive realignments- $61.3 million loss in 2002- $140 million loss in 2004- Still paid $.25 / share dividend - Share price down 24% from one year ago- Avg$29.15 in 2004, currentlyCompany Dividend HistroyFor three years in a row since 2000, dividends had exceeded earningsIn 2003, dividends were decreased to a level below earningsDespite losses in 2004, small dividend was declared It has not paid dividend in 2005 although it had committed earlier to pay sometime in 2005 For three years in a row since 2000, dividends had exceeded earningsIn 2003, dividends were decreased to a level below earningsDespite losses in 2004, small dividend was declared It has not paid dividend in 2005 although it had committed earlier to pay sometime in 2005 Factors Influencing the Dividend policy DecisionsThere are three main factors that may influence a firm's dividend decision:Free-cash flowDividend clientelesInformation signalling The Free cash flow theoryThe firm pays out, as dividends, any cash that is surplus after it invests in all available positivenet present valueproject

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