In fact, in the case of the 10 percent payout ratio
, where the capital investment of $100 has a pre-tax value of $100, the effective corporate income tax rate is 87 percent, leaving an after-tax net present value of only $13.04.
The superiority of repurchases as a payout mechanism is confirmed by Grullon and Michaely  who report that the overall payout ratio
from 1974 to 1998 has remained constant at around 27%.
Commenting on the redemption, Michael Maturo, Reckson's Chief Financial Officer, stated, "The redemption of our remaining outstanding preferred stock with newly issued common equity, will further strengthen our balance sheet, create additional financial flexibility and improve our dividend payout ratio
A company should choose a payout ratio
that directs the majority of its free cash flow to shareholders as a dividend.
Payout of PkR27.5/sh rests higher than our estimate of PkR22.5/sh taking full year payout to PkR115/sh implying a payout ratio
of 66% vs.
* Free cash flow post-dividend for 2019 is estimated by Kwan to be $124 million, which implies an all-in payout ratio
This resulted in a payout ratio
of 110.0% for the three months and $116.9% for the six months ended June 30, 2019.
"With a stated policy of a 70% payout ratio
, it achieved 90% payout last year, and is on course to provide a continuing strong earnings and dvidend stream this year," he said.
The board's stated long-term targeted dividend payout ratio
continues to be in the range of 60 to 70 percent of earnings from operations.
Full year dividend will increment by 10.0% to HKD 0.66 per share, representing a dividend payout ratio
of 55.3%, compared to 55.1% in 2017.