Q.1 DIVIDEND POLICY AT FPL GROUP, INC In 1994 FPL Group, the parent company of Florida Power and Light Company, announced a reduction in its quarterly dividend from $.62 ($2.48 annual) a share to $.42. This was the first-ever dividend cut for a healthy utility, so the company did its best to explain to investors why it had taken such an unusual step.Table 1. YearDividend per shareEarnings per shareDividend payout ratioDividend payout (%)Earnings per share before extraordinary itemsDividend payout ratioDividend payout (%)19932.47 2.30 1.07 107.39 2.76 0.89 89.49 19922.43 2.65 0.92 91.70 2.65 0.92 91.70 19912.39 1.48 1.61 161.49 2.66 0.90 89.85 19902.34 (2.86)(0.82)(81.82)2.64 0.89 88.64 19892.26 3.12 0.72 72.44 2.99 0.76 75.59 19882.18 3.42 0.64 63.74 3.12 0.70 69.87 19872.10 3.10 0.68 67.74 2.69 0.78 78.07 19862.02 2.90 0.70 69.66 2.90 0.70 69.66 19851.94 3.11 0.62 62.38 3.11 0.62 62.38 19841.77 2.62 0.68 67.56 2.65 0.67 66.79 Mean68.2378.20Analysing dividend policy of FPL Group we could track some major steps, which leads company to that decision. From table 1, the number shows that FPL has paid very high dividend comparing to the earnings. Dividend has been increased every year. Furthermore, from the record, this company has a 47 years history of dividend increases.We can see that in 1990 dividend payout ratio was increased sharply compare to the previous years. Also, we can see that FPL had a loss in 1990, but the company still increased dividend. Furthermore, in 1991 to 1993 dividend payout ratio was significantly high when compare to the historical data. These sharp changes mostly happen because of the change in the management team. In 1989 McDonald retired from FPL's, and James Broadhead became a new chairman. After analysing industry and future prospects Broadhead concluded that FPL would need to have a commitment to quality and customer service, increase its focus on the utilities industry, expand capacity, and improve it...
