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Anz Capital Structure Essay

1142 words - 5 pages

The Report of Capital Structure and Dividend Payouts Policies - ANZ



The Report of Capital Structure and Dividend Payouts Policies - ANZ

The Report of Capital Structure and Dividend Payouts Policies - ANZ


IntroductionThe Australian and New Zealand Banking Group Limited (ANZ) is a regional bank that mainly operates in Australia and New Zealand. ANZ has strong domestic markets and intend to grow its presence in the Asia Pacific region. This report's aim is to analyze ANZ's capital structure and dividend policies by using relevant theories.Dividend Policy DiscussionANZ pays regular cash dividends to their shareholders by direct credit to their local accounts in their local currency, though the dividends are set in Australian dollars. The exchange rate used to translate the dividends to local currency is determined by ANZ base on the record date of the dividend. From the observation of ANZ's historically data, the shareholders are paid twice a year the end and the end of year dividend is often higher than the interim dividend.ANZ's pays fully or partially franked dividends, which may provide a tax-offset effect that benefits Australian resident shareholders, while the New Zealand resident shareholder may receive New Zealand imputation credits to dividends. Both would provide shareholders the benefit of offsetting their tax liability and avoid paying double tax. Regarding tax benefit, ANZ has its focus in Australia and New Zealand since it mainly operates in these two countries, but surely did not provide much tax benefit to overseas shareholders. (booklet, Apr 2013)The graph below shows ANZ had a dividend payout ratio between 57 to 83 percent during 2000-2012. Overall, it indicates that ANZ has a fairly consistent payout ratio, except in 2008 and 2009 when the ratio spiked almost 83%. The probable cause could be that the United State Financial Crisis affected ANZ earning, which required ANZ to increase the payout ratio to maintain the dividend despite the decrease in firm's profit. (Roberts, Feb 17, 2008) However the ratio was restored to 68 to 71 percent after 2009. From the recent announcement of dividend payout ratio target range of 65 to 70 percent, it is acceptable to assume that ANZ currently has a dividend policy to provide stable long-term dividend payment to its shareholders. (Grove, 30 Apr, 2013)Fig1. ANZ Dividend Payout Ratio from 2000 - 2012While to maintain a relatively high dividend payout ratio, ANZ managed to increase its total assets by 6% to 642,127m and retained earnings by 10.91% in 2012. But the recent announcement of off-shoring hundreds of jobs may indicate ANZ has the need to control its cost in order to maintain such stable earning and payout ratio.However, as Figure 1 indicates, the bank paid more than half of its earning to their investors in the past 12 years as cash dividends when they could spent it on repurchase its own stock. (centre, 2000-2012) This very choice could reflect that the management may...

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