Rak ceramic dividend appraisal full niloy saha

EAST WEST
UNIVERSITY
Report
Topic: An Appraisal of Dividend Policy of RAK Ceramics Limited.
.
Course Title: Corporate Finance.
Course Code: FIN-522 (Sec-1)
Submitted to:
Dr. Tanbir Ahmed Chowdhury
Professor, Dept. of
Business Administration & Director, Executive
East West University
Prepared By:
Date of Submission: 15th
September 2020
Niloy Saha
ID: 2018-2-95-019
East West University
Department of Business Administration
Program – MBA
(Summer-2020)

Letter of Transmittal
15th
September, 2020
Dr. Tanbir Ahmed Chowdhury
Department of Business Administration,
East West University.
Subject: Submission of the Report on Appraisal of Dividend Policy of RAK Ceramics Limited.
Sir,
It is an enormous pleasure to submit the report on Appraisal of Dividend Policy of RAK
Ceramics Limited . It was a great opportunity to work on such a project which helped me to
understand and also evaluate the general trend of this project.
I tried my level best to arrange this report to the requisite standard even facing few obstacles
while collecting data information. I thoroughly enjoyed and efficiently put all efforts to
successfully complete the report. Throughout the whole report, I gained immense knowledge
and experience which would enhance my career development.
Therefore, I request fervently to accept my report and enlighten me with your valuable
suggestions. I sincerely thank you for giving me the opportunity and support.
Sincerely yours,
Niloy Saha.
Id: 2018-2-95-019
MBA, East West University
(Summer-2020)

Acknowledgement
I, the creator of this report of FIN-522 course are sincerely thankful to all those people who
have been giving me any kind of assistance to work on this report.
I express my gratitude to our honourable faculty Dr. Tanbir Ahmed Chowdhury, who through
her vast experience and knowledge has been guiding me to accomplish this report. He gave
me this golden opportunity to do this wonderful report on the topic which also helped me in
doing a lot of analysis and we came to know about so many new things.

Executive Summary
In this project work the topic was to “Appraisal of Dividend Policy of RAK Ceramics
Limited.”
Dividend is a part of Net Income distributed among the shareholders. A dividend is usually
distributed in cash form to stockholders of a corporation approved by the board of director.
It may also include stock dividend or other forms of payment. A stock dividend represents
distribution of additional shares to common stockholders. Dividend policy is a fundamental
need of a company. The dividend policy such as the payment of dividend affects the market
price of share. If there is a debate in this issue, this theory is commonly accepted. The result
shows a significant relationship between dividend and share price. Some other factors such
as profit, EPS, growth rate, retained earnings, money supply etc. After analysing RAK
Ceramics’s dividend policy we can understand that RAK Ceramics Limited is following
Dividend Irrelevance Theory. Their dividend payment is less than EPS and most of the time
they declare stock dividend. As they retain more of their earnings for reinvestment and less
is paid as dividend to the shareholders. That means they concentrate more on maximizing
basic earning power and thus believe in wealth maximization and long term future capital
gain for their shareholders. As they are following Dividend Irrelevance Theory, it is also
consistent with Residual theory of dividend which focuses on accepting all acceptable
investment opportunities that leads to long term capital gain by maximizing basic earning
power and thus leads to owner’s wealth maximization and thus increases the value of the
company.In this report we are trying to explore the real scenario and the present condition of
the company. Earnings have declined by 6.8% per year over past 5 years, Dividend of 5.4%
is not well covered by earnings, Profit margins (6.8%) are lower than last year (14.2%). By
analyzing the profit, EPS, dividend we are trying to find out that RAK Ceramics Limited is
following the dividend relevance or irrelevance theory. I confidently think that this report
will serve as an effective research tool for the financial researchers, decision makers, and
policy planners, academics, to enable them in order to facilitate the analysis of the
Company’s economic permofmnce.

Contents
No: Items Name:
Page
No:
1.
Introduction
01
2.
1.1 Origin of the report
01
3.
1.2. Objectives of the study
01
4.
1.3. Scope and Methodology of the study
01
5.
1.4. Limitation of the Study
02
6.
Overview of RAK Ceramics Limited
03
7.
Company Profile
03
8.
RAK Ceramics Bangladesh
03
9.
Vision, Mission
04
10.
Key milestone
05
11. An appraisal of dividend policy of RAK
Ceramics Limited
06
12.
3.1 Overview of Dividend Fundamentals
06
13. 3.2 Appraisal of dividend policy of RAK Ceramics
Limited
10
14.
Net Income after Tax:
10
15.
Growth rate of net income
11
16.
Dividend Declaration
12
17.
Total dividend
15
18.
Earnings per Share
16

19.
Dividend Payout Ratio
18
20.
Dividend Retention ratio
20
21.
Relationship between NI & Total dividend
21
22.
Net Asset Value per share
22
23.
Price earnings (P/E) ratio
23
24. Dividend relevance or irrelevance theory of RAK
Ceramics
24
25.
Dividend Reinvestment Plan in RAK Ceramics
25
26.
Dividend policy followed by RAK Ceramics
26
27.
Findings and conclusion
27
28. 1.1 Findings of the study
29. 1.2 Conclusion 28
30.
Reference
29

1
Chapter 1
Introduction
1.1 Origin of the Report:
Our course instructor Professor Dr.Tanbir Ahmed Chowdhury has authorized us the report
as the Partial fulfillment of “Corporate Finance” course requirements. I am assigned to make
a Report on “An Appraisal of Dividend Policy of RAK Ceramics Limited” and complete a
study that covers all important factors.
1.2. Objectives of the study:
The objective of this report is to observe the dividend policy of RAK Ceramics Limited from 2014 to
2018 and Give a brief conclusion about the company’s dividend policy. This includes an overview of
the Company and which dividend policies they are practicing in the company.
Some objectives of the study are mentioned below:
1. To acquire knowledge about the different operations of a manufacture company
2. To know the services those at Manufacture Company provides for its customers.
3. To find out how the Dividend Appraisal system of a manufacture company runs.
4. To observe the working environment in manufacture company.
5. To know the overall functioning of RAK ceramics.
6. To have some practical exposures that will be helpful for my future career.
1.3. Scope and Methodology of the study
This section describes the methodology of the study. Main source of the information is
annual report of RAK Ceramics Limited, report of annual meeting, brochures and web sites.
The information incorporated in this report is heavily the secondary sources.

2
Primary Data:
No primary data has been used in making this report as no research is needed for this
report.
Secondary Data:
All the required secondary data was collected from last five years Annual Report of RAK
Ceramics from Dhaka Stock-Exchange and Internet.
As our method of analysis, we worked mentioned above is dividend policy, we presented
all the information through numerical and graphical means for a clear understanding.
1.4. Limitation of the Study:
 Time limitation: It was one of the main constraints that affected covering all aspects
of the study.
 Lack of secondary information: Every data was not much available over the net.
Secondary source of information was not sufficient for the completion of the report.
 Unorganized data: when we were making this report we found the data was in
unorgani-zed way and in different websites. So, it makes us confused to choose right
data source
 Limited Knowledge: Our knowledge about dividend is very limited .so it was
difficult for us to analysis this Hugh company’s dividend data of last 5 years.

3
Chapter 2
Overview of RAK Ceramics Limited
Company Profile
RAK Ceramics Limited is one of the largest ceramics’ brands in the world. Specializing in ceramic
and gres porcelain wall and floor tiles and sanitary ware we produce 123 million square metres of tiles
and 5 million pieces of sanitary ware per year at our 22 state-of-the-art plants across the United Arab
Emirates, India and Bangladesh.
Headquartered in the United Arab Emirates, we serve clients in more than 150 countries through our
network of operational hubs in Europe, Middle East and North Africa, Asia, North and South America
and Australia. Across our global operations we employ approximately 12,000 staff from more than 40
nationalities.
We are a publically listed company on the Abu Dhabi Securities Exchange in the United Arab
Emirates and on the Dhaka Stock Exchange in Bangladesh and as a group have an annual turnover of
approximately US$1 billion.
RAK Ceramics Bangladesh
RAK Ceramics Bangladesh is a proactive and resilient organization working in collaboration with all
its stakeholders in a focused, constructive and mutually beneficial manner. It is well positioned to
benefit from some of the structural long-term growth
drivers that include urbanization, housing
under-penetration, accessibility to financing
solutions and a growing inspirational middle-class.
The Company’s wide range
of branded products are made available to all potential and
emerging markets of the country through a unified
customer sales team and integrated supply chain
network that leverages the Company’s scale. We target
highest profitability, underpinned by a cost
conscious culture, as well as environmental, social and
governance (ESG) principles to drive shared value creation.
The Company has a primary
listing on the Dhaka Stock Exchange, and its operations
date back to the year 2000, with incorporation in 1998.

4
The structure of the business in its current state is representative of a UAE-Bangladesh joint venture
project.
The biggest factor that ensures the strongest differentiation for RAK Ceramics (Bangladesh) is its
wide product portfolio comprising ceramics and gres porcellanato (porcelain/fully vitrified) tiles,
bathroom sets and all types of sanitary ware. The Company has over 2,500 models active in the
ceramic and porcelain tiles business, and regularly introduces new designs that are closely aligned
with evolving consumer trends. The Company’s tiles range in sizes from 7.5 X 20 cm up to 80 X 80
cm, straddling the full chain of tiles products in Bangladesh
Vision
Our vision is to be the world’s leading ceramics lifestyle solutions provider.
Mission
Our mission is to foster an internal culture that we are committed to our vision of becoming the
world’s leading ceramics lifestyle solutions provider and we will achieve this by utilizing our
experience, our wide product range, our innovative approach and continuing to deliver quality. We
want to build a world-class organization. We have applied our expertise in some of the most iconic
and innovative projects around the world, and we aim to continue to push the boundaries in new and
exciting projects as we move forward.

6
Chapter 3
An appraisal of dividend policy of RAK Ceramics Limited
3.1 Overview of Dividend Fundamentals:
Dividends refer to that portion of a firm’s earnings which are paid out to the shareholders.
Dividend can be two types such as Cash dividend and Stock dividend. In cash dividend
shareholders get a certain percentage of cash of the net income whereas, a stock dividend is
the payment to existing owners of dividends in the form of stock.
A dividend policy is the policy a company uses to decide how much it will pay out to
shareholders as dividends from retained earnings. It is a part of net income distributed among
the shareholders. Whether and what amount to pay as cash dividend is decided by the board
of directors in (AGM) Annual General Meeting.
In the date of annual general meeting which is commonly known as record date; the
corporation Declares the payment date on which dividends will be paid to those shareholders
who were Registered in ex-dividend date.
In a corporation, there are two types of shareholders.
 Common stock: Dividend is not fixed and fluctuates by the net income.
 Preferred stock: Dividend is fixed and mentioned when it is issued. Preferred stock
can be classified in two types further.
 Cumulative preferred stock: Dividend payment is mandatory if company makes
profit. But if there is loss, on that year dividend won’t be paid. But in the next year,
company must pay the outstanding dividends if the company earns sufficient profit.
 Non-Cumulative preferred stock: Dividend payment is mandatory if company
makes profit. But if there is loss, dividend payment is not required for that year.

7
Dividend theory has 2 types.
 Dividend irrelevance theory: Dividend irrelevance theory put forth by Metorn H.
Millar & Franco Modigliani (M&M) that in a perfect world, the value of a firm is
unaffected by the distribution of dividends and is determined solely by the earning
power and risk of its assets and that the manner in which it splits its earnings stream
between dividends and internally retained funds does not affect this value.
There is no relationship between dividend and share price. Share price mostly depends on
basic earning power and risk of corporation. In this theory, shareholders are risk takers and
focused on long term investment. The informational content and Clientele effect is
considered in this theory.
 Dividend relevance theory: The theory Dividend relevance advanced by Gordon and
Lintner states that there is a direct relationship between a firm’s dividend policy and
its market value. Fundamentals to this proposition are their bird-in-the-hand argument,
which suggests that investors see current dividends as less risky than future dividends
or capital gains. That means investors are risk averse & attach less risk to current as
opposite to future dividends or capital gains.
Cash Dividend reduces investor uncertainty causing investors to discount the firm’s earnings
at a lower rate and it places a higher value on the firm’s stock. If dividends are increased,
investor uncertainty will decrease, lowering the required return and increasing the value of
the firm’s stock. Empirical studies fail to provide conclusive evidence in support of dividend
relevance argument. However, financial managers & stockholders believe that dividends are
relevant.
Factors affecting dividend policy:
There are several factors affecting dividend policy which are Legal Constraints, Contractual
Constraints, Internal Constraints, Growth Prospects, Owner Considerations and Market
Considerations.

8
Legal constraints: The Legal Constraints denotes an earnings requirement limiting the
number of dividends to the sum of the firm’s most present & past retained earnings is
sometimes imposed. However, the firm is not prohibited from paying more in dividends than
its current earnings.
Maximum dividend = Retained earnings + Net income of the year
Internal constraints: Dividend may be constrained by internal factors which are investment
in working capital and investment in marketable securities. Internal Constraints considers the
firm’s ability to pay cash dividends is generally constrained by the amount of excess cash
available rather than the level of retained earnings which to charge them.
Contractual constraints: Dividend may be constrained by long term loans. Creditors may
impose restrictions on new debt, dividends and corporate salaries to protect the firm from
insolvency. Contractual Constraints considers the firm’s ability to pay cash dividends are
constrained by certain restrictive provisions in a loan agreement. These Constraints prohibit
the payment of cash dividends. Constraints on dividends help to protect creditors from losses
due to insolvency on the part of the firm.
Growth Prospects: Growth Prospect focuses on the firm’s financial requirements are
directly related to the degree of assets expansion that is anticipated.
Owner Considerations: Owner Considerations includes tax status of a firm’s owners,
owner’s investment opportunities the potential dilution of ownership and prospects of firm.
Wealth of the firm’s owners reflected by the market price of share and market price of share
influenced by the dividend policy are stock holders prefer fixed or increasing level of
dividends as opposed to a fluctuating pattern of dividends.
Types of Dividend Policy:
There are three types of dividend policy which companies follow.
1. Constant Payout Ratio: It means the payment of fixed percentage of earning as dividend
every year. This certain percentage of dividend will be distributed among the shareholders

9
every year. Net income may differ from year to year. If a net loss incurs then no dividend will
be paid.
2. Regular Dividend: In this type of dividend policy the investors get dividend at usual rate.
Here the investors are generally retired persons or weaker section of the society who want to
get regular income. This type of dividend payment can be maintained only if the company
has regular earning. If retained earnings are available certain percentage of dividend will be
distributed. Even if net loss incurs dividend will be paid by corporation. It is considered as a
positive signal among shareholders. It stabilizes the market value of shares. It helps in giving
regular income to the shareholders.
3. Low Regular and Extra Dividend: Here the company pays low regular dividend to the
shareholders. Sometimes extra dividend is paid. The company uses this practice due to
Following reasons:
 Due to uncertain earning of the company.
 Due to lack of liquid resources.
 The Company sometime afraid of giving regular dividend

10
3.2 Appraisal of dividend policy of RAK Ceramics Limited:
In this section, the dividend policy of RAK Ceramics is appraised by considering different
factors such as Net income after tax, Earnings per share, Cash dividend, Stock dividend,
Dividend payout ratio, Net asset value per share, Total dividend, Market value per share,
Dividend per share, Authorize capital, Paid-up capital, Retained earnings, Face value, Last 52
weeks share price. Besides that, the growth rates of 5 years are also included in this paper.
Net Income after Tax: Net income is referred to as the bottom line, net profit, or net earnings
are an entity's income minus expenses for an accounting period. Net Income and its growth in the last
5 years of RAK ceramics.
Table 1: Net income after tax
Year Net Income After Tax (MN)
2014 562.80
2015 1094.34
2016 915.25
2017 1018.01
2018 890.63
Figure 1: Net Income after Tax in last 5 years
(Source: Annual report of RAK Ceramics 2014-2018)
562.8
1094.34
915.25
1018.01
890.63
0
200
400
600
800
1000
1200
2014 2015 2016 2017 2018
Net Income After Tax(MN)

11
Interpretation: In this graph, we are seeing that the net income of RAK Ceramics is
increasing and decreasing every year which is not positive sign for the company.
Growth rate of net income:
Growth is the percentage gain (or loss) in net income over time. Stocks with higher net
income growth rates are typically more desirable than those with lower net income growth
rates. Growth in net income is even more important than sales because net income tells the
investor how much money is left over after all of the operating costs are subtracted from
sales.
Table 2: Growth Rate of Net Income after Tax
Year Net Income(MN) Calculation Growth Rate
2014 562.80 - -
2015 1094.34 (1094.34-562.80)/ 562.80*100 94.45%
2016 915.25 (915.25-1094.34)/ 1094.34*100 -16.37%
2017 1018.01 (1018.01-915.25) 915.25*100 11.23%
2018 890.63 (890.63-1018.01)/ 1018.01*100 -12.51%
Figure 2: Growth Rate of Net Income after Tax in last 5 years
0
94.45%
-16.37%
11.23%
-12.51%
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
2014 2015 2016 2017 2018
Growth Rate of Net Income after Tax(MN)

12
Interpretation: Growth in net income is even more important than sales because net income
tells the investor how much money is left over after all of the operating costs are subtracted
from sales. From the above tables 1 and 2, we can see that RAK ceramics has earned profit in
the years 2014-18. But in the year 2016 and 2018 It has a negative growth rate of respectively
(16.37%) % and (12.51) % in profit. In 2015 and 2017, the growth of RAK ceramics was
significantly affected because of political unrest in Bangladesh.
Dividend Declaration:
After analyzing percentage dividend of the last 5 years, we have found out that RAK
ceramics had declared cash and Stock dividend in 2014-18 to its shareholders. Details are as
follows
Cash Dividend:
A cash dividend is money paid to stockholders, normally out of the corporation's current
earnings or accumulated profits. Not all companies pay a dividend. Usually, the board of
directors determines if a dividend is desirable for their particular company based upon various
financial and economic factors.
Table 3: Cash Dividend
Year Cash dividend
2014 15%
2015 25%
2016 20%
2017 10%
2018 10%

13
Figure 3: Cash Dividend
Interpretation: From the graph, we can see RAK ceramics has declared 10% cash dividend
2017-2018 on the face value for their shareholders and previous to that no cash dividend was
paid. They give stock dividend to their shareholders on a consistent basis through which they
spread good news in the market that it’s a good prospect company.
Stock Dividend:
Stock dividend is a payment made in the form of additional shares, rather than a cash payout.
It is also known as a “Scrip Dividend”. Companies may decide to distribute stock to
shareholders of record if the company’s availability of liquid cash is in short supply. These
distributions are generally acknowledged in the form of fractions paid per existing share. An
example would be a company issuing a stock dividend of 0.05 shares for each single share
held
Table: 4 stock dividend
Year Stock Dividend
2014 -
2015 -
2016 5%
15%
25%
20%
10% 10%
0%
5%
10%
15%
20%
25%
30%
2014 2015 2016 2017 2018
CashDividendRate% Cash Dividend

14
2017 10%
2018 10%
Figure 4: stock dividend
Interpretation: RAK declared at least 5 percent stock dividend on 2016. Is had declared
highest 10 percent stock dividend in the year 2017-18.. It is also clear that, this company has
a position in between growing and maturity stage, though it has more internal and external
sources to raise fund for future expansion but it mainly focuses on internal sources. It also
helps the company by provide dividend without transfer of cash and also a tool to increase
number of common stock/ paid up capital.
0% 0%
5%
10% 10%
0
0.02
0.04
0.06
0.08
0.1
0.12
2014 2015 2016 2017 2018
CashDividendRate%
Stock Dividend

15
Total dividend:
Total dividend is the summation of cash dividend and stock dividend. Sometimes RAK
ceramics pay only cash dividend and sometimes only stock . In 2014 and 2015 it did not
pay Stock dividend.
Table: 5 Total dividend
Year Cash Dividend Stock Dividend Total Dividend
2014 15% 0% 15%
2015 25% 0% 25%
2016 20% 5% 25%
2017 10% 10% 20%
2018 10% 10% 20%
Figure 5: Total Dividend
15%
25% 25%
20% 20%
0%
5%
10%
15%
20%
25%
30%
2014 2015 2016 2017 2018
Total Dividend

16
Interpretation: In the above graph, we can conclude that RAK Ceramics does not follow
any specific dividend policy. In last 5 years, maximum dividend was paid in 2015-16 and
total dividend was constant in 2017 to 2018. We also see that the percentage of stock
dividend was not similar as well as they also declare cash dividend in recent two years and
the percentage of stock dividend was not same. Finally, the percentage of total dividend is
fluctuated from 15% to 25%.
Earnings per Share:
The portion of a company's profit allocated to each outstanding share of common stock. Earnings per
share serve as an indicator of a company's profitability. It is calculated by subtracting net income
from dividend on preferred stock and divide by the number of shares outstanding.
Table 6: Earning per Share
Year EPS
2014 34.55
2015 20.58
2016 22.76
2017 20.81
2018 17.04
Figure 6: Earning per share last 5 years
34.55
20.58 22.76 20.81
17.04
0
5
10
15
20
25
30
35
40
2013 2014 2015 2016 2017 2018 2019
EPS
Earning Per Share

17
Interpretation: The table and graph provides the information of EPS of RAK Ceramics in
different years. It shows EPS was decreasing from 2014 to 2018 at gradually. Overall its EPS
is increasing trend which is considered an important indicator of corporate loss.
Growth Rate in Earning per Share:
Table 7: Growth Rate in Earning per Share
Year EPS Calculation Growth Rate %
2014 34.55 - -
2015 20.58 (20.58-34.55)/
34.55*100
-40.43%
2016 22.76 (22.76-20.58)/
20.58*100
10.59 %
2017 20.81 (20.81-22.76)/
22.76*100
-8.57 %
2018 17.04 (17.04-20.81)/
20.81*100
-18. 12%
Figure 7: Growth Rate in Earning per Share
0
-40.43%
10.59%
-8.57%
-18.12%
-0.5
-0.4
-0.3
-0.2
-0.1
0
0.1
0.2
2013 2014 2015 2016 2017 2018 2019
EPS
Growth Rate in Earning per Share

18
Interpretation: From the above table and chart, we can see that from 2014 to 2018 the
growth rate of earning per share is fluctuating each year, EPS was in decreasing mode in
2014-2018 which was not good for both the company and for the shareholders. And it has in
increased in 2015 with little margin.
Dividend Payout Ratio:
The dividend payout ratio indicates the percentage of each dollar earned that is distributed to
the owners in the form of cash. It is calculated by dividing the firm’s cash dividend per share
by its earning per share. With this policy, the firm establishes that a certain percentage of
earnings is paid to owners in each dividend period. The problem with this policy is that if the
firm’s earnings drop or if a loss occurs in a given period, the dividends may be low or even or
zero. Because dividends are considered an indicator of firm’s future condition, the firm’s
stock price may thus be adversely affected.
Table 8: Dividend Pay-out ratio
Year Cash
Dividend
EPS Calculation Dividend Payout ratio
(%)
2014 15% 34.55 (15/34.55) 0.43%
2015 25% 20.58 (25/20.58) 1.21%
2016 20% 22.76 (20/22.76) 0.88%
2017 10% 20.81 (10/20.81) 0.48%
2018 10% 17.04 (10/17.04) 0.59%

19
Figure: 8 Dividend Payout ratios
Interpretation: From the bar graph, it can be said that RAK ceramics had the highest
dividend payout ratio in 2015 that means the company paid 1.21% of each dollar earned
that is distributed to the owners in the form of cash. In this year the growth rate is also
abnormally high than the previous year. Another issue is that it has decreasing dividend
payout ratio from 2015. Investors seeking high current income and limited capital
growth prefer companies with high Dividend payout ratio. However, investors seeking
capital growth may prefer lower payout ratio because capital gains are taxed at a lower
rate. High growth firms in early life generally have low or zero payout ratios. As they
mature, they tend to return more of the earnings back to investors.
0.43
1.21
0.88
0.48
0.59
0
0.2
0.4
0.6
0.8
1
1.2
1.4
2013 2014 2015 2016 2017 2018 2019
EPS
Dividend Payout ratios

20
Dividend Retention ratio: Retention Ratio indicates the percentage of a company's
earnings that are not paid out in dividends but credited to retained earnings. It is the opposite
of the dividend payout ratio, so that also called the retention rate. The payout ratio is the
number of dividends the company pays out divided by the net income
Table 9: Dividend Retention Ratio
Year Dividend Payout
ratio
Calculation Dividend retention ratio
2014 0.43% (100-0.43) 99.57%
2015 1.21% (100-1.21) 98.79%
2016 0.88% (100-0.88) 99.12%
2017 0.48% (100-0.48) 99.52%
2018 0.59% (100-0.59) 99.41%
Figure 9: Dividend Retention Ratio
98.40% 98.60% 98.80% 99.00% 99.20% 99.40% 99.60%
2014
2015
2016
2017
2018
Dividend Retention Ratio

21
Interpretation: In 2014 to 2018 the retention ratio was 98.79% as on that years no cash
dividend paid to their shareholders and keeps all retained earnings. By seeing the trend of
retention ratio, we can say they were followed dividend irrelevance theory for their future
growth.
Relationship between NI & Total dividend:
We all know that dividend is declared based on net income. So there is a positive relationship
between net income and dividend. These relationships are given below.
Table 10: Relationship between NI & Total dividend
Year Net Income After Tax (MN) Total Dividend
2014 562.80 15%
2015 1,094.34 25%
2016 915.25 25%
2017 1,018.01 20%
2018 890.63 20%
Interpretation: From the above table, we can see that net income is continuously not raising
from 2014 to 2018 and percentage of dividend payment also not increased. Net income and
dividend are same in theses year. When net income increase than dividend also increase. As
net income increases every year, however dividend rate become constant at the same point so,
we can assume that company focus on future investment rather paying dividend which
ultimately enhance the shareholders wealth in long run.

22
Net Asset Value per share:
The net asset value per share is referred to as the book value per share which is an expression
for net asset value represents the value per share of firm’s investment. It is calculated by
dividing the total net asset value of the fund or company by the number of shares outstanding.
Table 11: Net Asset Value per Share
Year NAV Growth rate in % Market price of shares
2014 17.57 - 41
2015 17.93 2.05% 42.58
2016 18.14 1.17% 57.69
2017 18.25 0.61% 53.36
2018 17.97 (1.5%) 46.45
Figure 11: Net asset value share and market share price and growth rate
Interpretation: The net asset value (NAV) per share shows a Increasing mode starts from the
year 2014 and continues till 2017 and slightly decreased in 2018. NAV trend influence the
0
10
20
30
40
50
60
70
80
2014 2015 2016 2017 2018
17.57 17.93 18.14 18.25 17.97
41 42.58
57.69 53.36
46.45
Market price
of shares
NAV

23
market price of the share which also has a increasing mode starts from the year 2014 and
continues till 2017 and slightly decreased in 2018.
Price earnings (P/E) ratio:
Price ratio is a key investor performance measure. P/E ratio is the ratio of a company’s
current share price to its earnings per share. A high P/E ratio indicates strong shareholders
confidence towards the company and low-Price earnings (P/E) ratio indicates lower
confidence.
Table 12: Price earnings ratio
Year P/E ratio (*times)
2014 34.55
2015 20.58
2016 22.76
2017 20.80
2018 17.04
Figure 12: Price earnings ratio
Interpretation: It is seen that year end P/E ratio was at least 17.04 times in the year 2018
and highest P/E ratio was 34.55 times in the year 2014. P/E ratio have a downwards direction
34.55
20.5822.76
20.8
17.04
P/E ratio
2014
2015
2016
2017
2018

24
till 2018, means that investors are anticipating higher growth in the future. The average
market P/E ratio is 20-25 times earnings so RAK’s P/E ratio is below average.
Dividend relevance or irrelevance theory of RAK Ceramics:
Table 13: Glimpse of RAK two others during 5 Years
Particulars RAK Ceramics MONNO
Ceramics
Fu-Wang
Ceramic
Industries Ltd.
Face/par Value 10 10 10
52 Weeks' Moving Range 22.5 - 35.6 99.00 - 242.90 5.60 - 12.50
Authorized Capital (million) 6,000 (MN) 1,000 (MN) 5,000
Current rate 27.90 131.90 10.80
Paid-up Capital (million) 4,279.69 (MN) 359.28 1,362.69
EPS (Average 5 years) 23.15 235.47 23.80
Cash dividend (Average 5
years)
16 % 3% 0.2%
Stock dividend (Average 5
years)
5 % 7% 10%
Table 14: Relation between Dividend and Market Price of Share
Year Dividend Stock price in DSC
2014 15% 41
2015 25% 42.58

25
2016 25% 57.69
2017 20% 53.36
2018 20% 46.45
(Source: DSE website)
Interpretation: From the table and chart given below, we can say that market price was
high when rate of dividend was high in 2016. Then the decreasing rates of dividend results
gradually decrease of market price. Here we can comment according to dividend Relevance
theory
According to available data from 2014 to 2018, it is clear that RAK Ceramics is following
dividend relevance theory (Bird-in -The Hand Theory) which is developed by Myron J.
Gordon & Linter. Myron J. Gordon & Linter said that there is a direct link between Dividend
Policy of the firm and its market value and a company may declare higher dividend because
of the following reason:
 Stockholders prefer current dividend
 Direct link between dividend policy of the firm and its market value
 Investors are risk averse & attach less risk to current as opposite to future dividends or
capital gains.
 Investors believe that “a bird in the hand is worth two in the bush”
 Cash dividend reduce uncertainty causing earning at a lower rate
Dividend Reinvestment Plan in RAK Ceramics.
A dividend reinvestment plan (DRP) is a plan offered by a corporation that allows investors
to invest their cash dividend by purchasing additional shares or fractional shares on the
dividend payment date. Investors use for the creation of wealth. So, it is designed for long
time investors but after analyzing the data we see that investors are very much eager to
reinvest their dividend
Because we see that during 2014 to 2018 the Net Asset value (NAV) per share gradually
increased from 2014 to 2017, after that it starts increasing NAV which indicates that
investors are start reinvesting their dividend thought there are other factors that increase NAV.
But, from 2017 to 2018 NAV decreased.

26
As the company’s asset allocation per share gradually increased, it results in increasing the
share price of the company, which sends a positive signal to the investors to reinvest their
dividend
Dividend policy followed by RAK Ceramics:
From the above analysis of dividend payment of RAK Ceramics, we can understand that the
company is following Regular Dividend Policy as they are paying total dividend of 15%,
15%, 25%, 25%, 20%, 15%respectively from 2014-2018. So, the company is paying a fixed
percentage of earning as dividend This policy provides the owners with positive information,
thereby minimizing their uncertainty.

27
Chapter 4:
Findings and conclusion
1.1 Findings of the study
After the analysis of the dividend policy of RAK Ceramics limited, by collecting all the
data from 2014 to 2018 of RAK Ceramics limited, it is clearly mentioned as a financially
well-balanced company in Bangladesh. The company’s sales volume is higher in every year. As a
result, the growth in net income is also reasonable for investors to invest in this particular
company we have found the following findings:
 As we know our stock market is imperfect and inefficient, the investors of RAK
Ceramics limited were very much eager to get the cash dividend rather than stock
dividend.
 During 2014-2017, the net asset value per share of RAK Ceramics limited was
increasing which adversely affected the share price of the company which resulted in
increasing the demand of shares and also the share price. But 2018 in starts decreasing
its NAV which positively affected the share price of the company which resulted in
decreasing the demand of shares and also the share price.
 This company was not perfect but mostly follows dividend relevance theory which
indicates that the investors who invest here are risk. They are concern about present
benefits rather future. It is creatinga negative impact towards long term investors.
 Although the retained earnings of the RAK Ceramics limited was increased
simultaneously, but the company was issuing less bonus shares and was focusing
more on cash dividends.
 Net income after tax is in increasing trend (Growth in net income is even more important
than sales because net income tells the investor how much money is left over after all
of the operating costs are subtracted from sales.)

28
If the overall market’s situation is remaining same for next years, the company’s policy is
more profitable than the target ratio of ceramics industry in Bangladesh. From the overall
analysis above we can see that RAK Ceramics limited follow dividend irrelevance theory and
constant payout ratio dividend policy.
1.2 Conclusion:
At present RAK Ceramics limited is a multinational cooperation, which has a great
customer’s responsively. It is one of the well-known names in the business sector of Bangladesh.
The company was at top three or four years agoby collecting all the data from 2014 to 2018 of
RAK Ceramics limited, it is clearly mentioned as a financially well-balanced company in
Bangladesh. The company’s sales volume is higher in every. The issued dividends and
amount is determined mainly on the basis of the RAK Ceramics limited has available profit
or surplus cash and influenced by the company’s long-term earning power. For that, RAK
Ceramics limited must need to change their policy as per the market situation as long as with
the satisfaction of the stakeholders to reduce the agency conflicts. Its manufacturing facilities
have been accredited by the leading global regulatory authorities, and medicines
manufactured by the company are now being exported to more than 35 countries around the
world. In its long journey of more than three decades, the Company has remained committed
to ensuring health and wellbeing of the people by providing high quality, affordable
medicines.

29
References
1. RAK Ceramics limited
https://www.rakceramics.com/bangladesh/en-bd/
2. Lanka bangla
https://www.lankabangla-investments.com/rak-ceramics-bangladesh-limited/
3. Share info of RAK Ceramics limited
https://www.investing.com/equities/rak-ceramics-dividends
4. Annual report of RAK Ceramics Ltd.
5. https://www.rakcerambd.com/investor-annual-reports.php
6. Wikipedia
https://en.wikipedia.org/wiki/RAK_Ceramics

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