Paul Pigeon is a day trader. He is interested in the common stock of Captain Computers Limited. The following data are available for the company:
|
|
2014
|
2015
|
2016
|
|
Dividends paid per share*
|
$4
|
$3
|
$2.50
|
|
Dividend yield ratio
|
5.5%
|
5.5%
|
5.5%
|
|
Dividend payout ratio
|
40%
|
40%
|
40%
|
|
Return on total assets
|
10%
|
12%
|
8%
|
|
Return on common stockholders' equity
|
8%
|
14.5%
|
9%
|
*There were no changes in common stock outstanding over the three-year period.
Required: Paul would like answers to the following questions:
- Is the market price of the company's stock going up or down?
- Is the company employing financial leverage to the advantage of the common stockholders?