Statement of the Problem
FPL Group Inc. (FPL) is the largest electric utility guild in Flordia. FPL has been operating with consistent growth since 1925, and has paid an increase dividend for the last 47 years. Recently, the utilities industry has undergone deregulation, allowing consumer to have their own distributor. With the later(prenominal) increased competition, FPL is considering freezing or reducing its current dividend in order to devote more profit to future growth. As a result of this uncertainty, FPLs stock price has locomote a significant 6% in one day. analyst Kate grievous of First Equity Securities had previously issued a behave testimonial based on the assumption that FPL would maintain or slightly increase its dividend. Kate Stark must now check if she should change her stance, and if so, if her new recommendation is to buy or sell.
Discussion
Kate Stark and First Equity must make a recommendation to investors based without knowing for certain the course of action FPL bequeath take. Lets first look at the repercussions of FPL maintaining their 47 year streak, increasing the dividend as usual. This is the most unlikely scenario stipulation that FPLs current payout ratio is 1.07 while the industry number is 0.8.
By tying up its cash flows in dividend payouts, FPL is shortly unprepared to face the increased competition that is sure to puzzle from industry deregulation. This would not bode well for future favorableness and value to investors.
Recommendation
Kate Stark should change her previous hold recommendation to sell. There is compelling evidence that FPL may drop its dividend payout, and even if it doesnt the stock price will chill out drop in the near future. Investors who are bullish on FPLs future earnings prospects can still choose to buy back their stock after the initial plummet that may occur from a dividend reduction.If you want to get a full essay, order it on our website: Ordercustompaper.com
If you want to get a full essay, wisit our page: write my paper
No comments:
Post a Comment