Harley Davidson, Inc. (NYSE symbol HOG), produces and sells luxury motorcycles in the United States and Europe. The company has paid dividends since 1993.
|
Years Ending 31 December (US$ millions) |
2006 |
2007 |
2008 |
|
Net income (earnings) |
$1,043 |
$934 |
$655 |
|
Cash flow from operations |
762 |
798 |
(685) |
|
FCInv (capital expenditures) |
220 |
242 |
332 |
|
Net borrowing |
493 |
352 |
1,845 |
|
Dividends paid |
213 |
261 |
302 |
|
Stock repurchases |
936 |
1,132 |
249 |
|
Yahoo! Finance website, 24 July 2009. |
1. Using the above information, calculate the following for 2006, 2007, and 2008:
A. Dividend/earnings payout ratio
B. Earnings/dividend coverage ratio
C. Free cash flow to equity (FCFE)
D. FCFE/[dividend+stock repurchase] coverage ratio
2. Discuss the trend in earnings/dividend coverage as compared with the trend in FCFE/[dividend+stock repurchase] coverage.
3. Comment on the sustainability of HOG’s dividend and stocks repurchase policy after 2008.