Dividend Policy

Year Net Profit Total no. EPS (BDT) Dividend DPS (BDT) Dividend
After of (BDT) as a
Tax(BDT) common percentag
stock e of
outstandi Earnings
ng (%)
2002 28,415,58 6,00,000 31.57 18,000,000 30 63.34
9
2003 29,051,56 6,00,000 32.28 18,000,000 30 61.96
8
2004 28,662,00 6,00,000 31.85 18,900,000 31.5 65.94
1
2005 32,761,93 25,00,000 36.40 18,900,000 7.56 57.68
1
2006 20,539,57 25,00,000 22.82 18,900,000 7.56 92.02
9

Average Dividend as a percentage of Earnings (%) = 68.19%

Average DPS = 21.32

From the above table, observing the dividend as a percentage of earnings, it can be
said that the company had not followed the constant pay out dividend policy. In
2002 and 2003, the DPS was same though the income has increased. On the other
hand, DPS and pay out ratio both increased in 2004, even though the income has
fallen by 3, 89,567 BDT. The income of the company has increased considerably
compared with previous years, but the dividend pay out ratio has declined.

Considering all years, we can see that the dividend pay out ratio is not same. SO it
can be concluded that the company did not follow the constant pay out ratio.

Considering all five years, we can conclude that the company has not followed
regular dividend policy as the DPS was not same all over these five years.

But in 2002 and 2003 paid the same DPS (30) when it Outstanding shares were
600,000. Again when the number of outstanding shares(2500,000) were same in
2005 and 2006, the company paid the same DPS (7.56) which we can termed as
Regular Dividend Policy.
IBN SINA Pharmaceuticals Limited does not follow the low regular and extra
dividend policy because every year this company did not maintain low regular
dividend and it did not pay any extra dividend when the earnings were higher.

Capital Structure
Total debt Total Assets Debt to Asset Debt to Equity
Year (BDT) (BDT) ratio (%) ratio (%)
2002 115,362,161 137,957,135 83.62 16.38
2003 111,518,902 245,727,913 45.38 54.62
2004 116,084,393 260,304,654 44.60 55.40
2005 174,604,497 336,216,286 51.93 48.07
2006 130,741,119 290,713,311 44.97 55.03

Observing the above table, we can see that the company has used high debt in 2002 and D/A ratio was
83.62 %. Consequently its D/E ratio was lower compared with other years. Then, in 2003 it D/A ratio
declined to 45.38 % resulting in increased D/E ratio. Later on it had almost same D/A ratio in 2004 and
2006. In between, the ratio has increased to 51.93 % in 2005.

We know that interest is a tax deductible item. So the company gets a high tax
advantage because it has a high rate of debt. If it uses debt higher than the optimal
level its cost of debt will dilute the tax advantage. The high debt increases the
bankruptcy risk of the company. So the company has to maintain the optimal debt
level.