Chartered Financial Analyst Level 2
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38 An analyst gathers the following information about a REIT for the year just ended:
- FFO:
$70,000 - Non-cash rent:
$5,000 - Recurring capital expenditures:
$10,000 - Weighted average number of common shares: 25,000
If dividends per share are $1.00 for the year, the dividend payout ratio on adjusted FFO is closest to:
Exam-Like
A
29%.
B
38%.
C
45%.
Explanation:
Calculation Explanation
Step 1: Calculate Adjusted FFO
- FFO =
$70,000 - Adjusted FFO = FFO + Non-cash rent - Recurring capital expenditures
- Adjusted FFO =
$70,000 +$5,000 -$10,000 =$65,000
Step 2: Calculate Adjusted FFO per share
- Adjusted FFO per share = Adjusted FFO / Weighted average shares
- Adjusted FFO per share =
$65,000 / 25,000 =$2.60
Step 3: Calculate Dividend Payout Ratio
- Dividend per share =
$1.00 - Payout ratio = Dividend per share / Adjusted FFO per share
- Payout ratio =
$1.00/$2.60= 0.3846 or 38.46%
The closest answer is 38% (Option B).
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