Question

Forecasting dividends requires forecasting the firm's earnings, dividend payout rate, and future share count. True or False

Answer 1

True. Forecasting dividends involves forecasting a firm's earnings, dividend payout rate, and future share count.

Step-by-step explanation:

True

Forecasting dividends does indeed require forecasting a firm's earnings, dividend payout rate, and future share count. These factors are important in determining the amount of dividends a company will pay out to its shareholders. Let's break it down:

1. Earnings: The firm's earnings or profits serve as the basis for determining the amount of dividends it can afford to pay out. Higher earnings typically translate into higher dividends.
2. Dividend Payout Rate: This refers to the percentage of earnings that the company decides to distribute as dividends. The dividend payout rate can vary from company to company.
3. Future Share Count: The number of shares a company has in the future affects the dividend per share. If the share count increases, the dividend per share may decrease, and vice versa.

By forecasting these three factors, analysts can estimate the dividends a firm is likely to pay in the future.