In its 2016 annual report, Lockheed Martin reported net earnings of $5,302 million and dividends paid of $2,048 million. Your forecast of net income for Lockheed Martin for 2017 is $5,504 million.
What are projected dividends for the company for 2017?
A) $2,126 million
B) $2,048 million
C) $2,307 million
D) $2,069 million
E) None of the above

Question

Quizplus · Accepted Answer

The projected dividends for 2017 can be estimated by maintaining the same payout ratio as in 2016. The payout ratio for 2016 is calculated as dividends paid divided by net earnings: $2,048 million / $5,302 million = 0.386 (approximately). Applying this payout ratio to the forecasted net income for 2017 ($5,504 million) gives: 0.386 * $5,504 million = $2,126 million (approximately).

In Its 2016 Annual Report, Lockheed Martin Reported Net Earnings