Home Depot, Inc.’s income statements for 2007, 2008, and 2009 show basic earnings per shareof $2.38, $1.34, and $1.58, respectively. Diluted earnings per share figures are slightly lower thanthese numbers, indicating the impact of potential capital stock activity that could reduce earningsper share for current stockholders.The company paid cash dividends of $0.90 per share in each of 2007, 2008, and 2009.a. Why do you think Home Depot is paying out only about 38 percent to 67 percent of its netincome to stockholders in the form of cash dividends?b. If you were an investor in Home Depot ’s stock, would you be unhappy because your dividendsrepresented such a small percentage of the company’s net income?
Home Depot, Inc.’s income statements for 2007, 2008, and 2009 show basic earnings per shareof $2.38, $1.34, and $1.58, respectively. Diluted earnings per share figures are slightly lower thanthese numbers, indicating the impact of potential capital stock activity that could reduce earningsper share for current stockholders.The company paid cash dividends of $0.90 per share in each of 2007, 2008, and 2009.a. Why do you think Home Depot is paying out only about 38 percent to 67 percent of its netincome to stockholders in the form of cash dividends?b. If you were an investor in Home Depot ’s stock, would you be unhappy because your dividendsrepresented such a small percentage of the company’s net income?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Home Depot, Inc.’s income statements for 2007, 2008, and 2009 show basic earnings per share
of $2.38, $1.34, and $1.58, respectively. Diluted earnings per share figures are slightly lower than
these numbers, indicating the impact of potential capital stock activity that could reduce earnings
per share for current stockholders.
The company paid cash dividends of $0.90 per share in each of 2007, 2008, and 2009.
a. Why do you think Home Depot is paying out only about 38 percent to 67 percent of its net
income to stockholders in the form of cash dividends?
b. If you were an investor in Home Depot ’s stock, would you be unhappy because your dividends
represented such a small percentage of the company’s net income?
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