Question

Explain what you believe is the dividend policy for The Kroger Co. (KR) and Sprouts Farmers Market, Inc. (SFM). In answering this question, discuss the concepts that were examined in class. (Dividends per share, payout ratio, dividend yeild) The points earned depend on the depth of the discussion of the dividend policy for each of these two companies. Provide financial metrics as necessary.

Answer 1

The kroger co. has strategy to use 1/3 of free cash flw for debt reduction and 2/3rd of free cash flow for dividend and share repurchase agreement

It is regular dividend paying company which pays dividend every quarter

EPS of share is 2.09$ and dividend is 0.5$, hence Dividend payour retio = 0.5/2.09 = 23.92%

Stock is trading at 25.69$ which makes dividend yield of = 0.5/25.69 = 1.94%

Thus , there is high possibilitly of company to issue offer of buy back as dividend per share is low as compared to policy

The Sprouts Farmers Market, Inc.has borrowed fund and as part of agreement the company can not distribute it's profit as dividend. Thus there has not been any distribution of dividend by the company

Thus the Dividend per share will be nil, and thus payout ratio and dividend yield can not be calculated