## Estimating dividends

#### You have three possible ways to forecast total dividends:

1.    Payout ratio %
2.    Dividend per share
3.    Enter Total dividends directly

#### How to define which parameter dominates?

From the first two you are able to choose which parameter you would like to use as dominating. Dominating parameter is a parameter that always remains unchanged unless you change the parameter itself. For example if Net earnings changes, it should change either Payout ratio % or Dividend per share. This can be decided with the following way:

In the Estimate parameters (and also in Capitalization) section, there is row called Is payout ratio % dominating?. The row can be found under Payout ratio %.

1 in this row means 'yes' and 0 means 'no'. So if you would like to use Dividend per share for the current year and Payout ratio % for the rest of the future years, the row in your model should look like this. (If you start to fill an empty model, Dividend per share is dominating for the first two years and Payout ratio % after that as a default.)

#### Calculation rules

When you use Payout ratio % (dominating = 1), the model calculates:
1.    Total dividends = Payout ratio % x Net earnings
2.    Dividend per share = Total dividends / No of shares total at year end*
* A sum of series I and II
When you use Dividend per share figures (dominating = 0), the model calculates:
1.    Total dividends = No of shares (series I) at the year end x Dividend per share (series I) + No of shares (series II) at the year end x Dividend per share (series II)
2.    Payout ratio % = Total dividends / Net earnings

Here is an example how Total dividends can be calculated: If you change a parameter in Income statement so that Net earnings become, let us say 2000, the result is different for the two years:

In 2002 (when Dividend per share is dominating) Total dividends remain in 500 and Payout ratio % becomes 25 %.
However, in 2003 (when Payout ratio % is dominating) Total dividends becomes 800 and Dividend per share adjusts itself to 8.

Nevertheless, no matter which parameter is dominating, you can still input Payout ratio % or Dividend per share. The model calculates another afresh but does not change the domination.
If you change Total dividends directly, the model calculates:
1.    Payout ratio % = Total dividends / Net earnings
2.    Dividend per share = Total dividends / No of shares total at year end*
* A sum of series I and II

#### History years

(Notice that in history years, Total dividends are always calculated on the basis of Dividend per share figures which are inputted. Payout ratio % is calculated as Total dividends / Net earnings.)