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What is (are) the best ways to support the use of dividends in estimating company value?

What is (are) the best ways to support the use of dividends in estimating company value?

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Answer #1

For estimating company value, dividend is used in EBIT - EPS analysis.

EBT means earning for the equity shareholder, whereas EBIT means earning for fixed capital.

dividend means earning per share on preference and equity capital.

EPS means earning on equity capital after deduction of earnings on preference capital from EBT i.e., Earnings before tax.

company value is calculated by multiplication of market price per share and dividend per equity share.

Dividend fluctuates if there is financial leverage i.e., existence of debt in the capital structure because of deduction of interest from EBIT i.e., Earnings before interest and tax.

So, we have seen above how company value may vary on account of dividend.

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