Dividend Policy at FPL Group Inc A Case Solution

Case Solution

A Wall Street analyst just discovered that FPL (the holding company for Florida's greatest electric utility) may cut its dividend in many days despite a 47-year streak of consecutive dividend increases. Consequently from the deregulation in the electric utility industry, FPL has substantially modified its competitive strategy within the last a long time. The analyst need to research whether a modification of dividend policy will be a part of FPL's financial strategy in this particular deregulated atmosphere.

Excel Calculations

Calculation of Cash Flow Avaiable to Equity Holders (1994-1998)

Analysis of Different Dividend Policies

Scenario 1: No Dividend Cut & Dividend Grows at 2%

Dividend Growth Rate,Currect Dividend,Forecast Dividend Per Share,,Total Forecast Dividend,Payout Ratio,Dividend to FCFE Ratio,Additional Financing Needed

Scenario 2: No Dividend Cut & No Dividend Growth

Forecast Dividend Per Share,,Total Forecast Dividend,Payout Ratio,Dividend to FCFE Ratio,Additional Financing Needed

Scenario 3: 20% Dividend Cut & Dividend Grows at 5%:

Dividend Growth Rate,Currect Dividend,Forecast Dividend Per Share,,Total Forecast Dividend,Payout Ratio,Dividend to FCFE Ratio,Additional Financing Needed

Questions Covered

Executive Summary

Introduction

Industry Environment and Dividend Preferences

Analysis of Dividend Policy

Scenario 1: Continued Dividend Growth

Scenario 2: Stable Dividends

Scenario 3: Dividend Cut

Predicting the Price Changes

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