Question

​The Costco Wholesale Corporation​ (COST) operates membership warehouses that offer a wide variety of branded and private label products in​ no-frills, self-service warehouse facilities. In 2008 the company paid total cash dividends of ​$265,029,000 and had net income of ​$1,282,725,000.

Required:
a. What was the​ firm's dividend payout​ ratio?
b. If Costco were to earn ​$1.58 billion in 2009 and maintained the same dividend payout ratio that it paid in​ 2008, what would the​ firm's dividends​ be?

Answer 1

a. 20.66%

b. $326,428,000.

Step-by-step explanation:

a. The Costco Wholesale Corporation​ (COST) paid dividends to its shareholders. To calculate its dividend payout ratio:

(Total dividends paid / Net Income) * 100

= ($265,029,000 / $1,282,725,000) * 100

= 20.66%

b. If Costco earns $1.58 billion and maintains current payour ratio of 20.66% then its dividend will be;

$1,580,000,000 * 20.66%

= $326,428,000.