Tomkins PLC Essay Example | Topics and Well Written Essays - 1250 words

Tomkins PLC - Essay Example The declaration of dividend is often almost solely dependent on the internal condition of a company. Accordingly, a company is only able to declare a cash dividend if its operation in the fiscal year had been profitable and if it has enough cash. Capital gains on the other hand, are determined by various factors internal and external to the company. Operating performance, investor financial ratios, revenues and profits are often determines the price level of stocks. Other external factors such as interest rates, competitors, and other company issues are irrefutably integrated in the investors' perception of the intrinsic value of a stock. Thus, the creation of wealth for shareholders is often reflected at the dividend pay-outs and the appreciation of its stock price. This report will look at the shareholder value creation of Tomkins PLC for the past ten years. The next section will give a brief background on the company. The paper will then present how the company maximized shareholder value through dividends and capital gains. Relevant investor ratios will also be examined. Lastly, the report will conclude on how the company can further develop its wealth creation record. Tomkins PLC is player in the international engineering industry listed in both London (LSE) and New York Stock Exchanges (NYSE). Generally, the company is subdivided into two business segments namely, industrial and automotive, and building products. The company expressed that "Our primary business objective is to achieve a long term sustainable growth in the economic value of Tomkins through strategic development of our businesses." Tomkins PLC was recognized by the Euromonitor as one of the top companies in the world in terms of Ownership Transparency and Rights, Financial Transparency & Process, Board Structure, Stakeholder Relations and Alignment of Managerial Interest. The company garnered a high score as it ranked number two in developing countries and the best of four British companies in the top ten (Tomkins top for Corporate Governance 2003). This just reflects the company's commitment in enhancing transparency for investors on the real value of their stocks. Tomkins Chairman David Newlands expressed, "We are very pleased with this accolade from Euromoney, which acknowledges the enormous amount of work that we have put into Corporate Governance. At Tomkins we have made corporate governance and delivering shareholder value our top priorities and this survey is recognition of how far we have come. We continue to concentrate on maintaining the highest standards of transparency and delivering value to our s hareholders." Dividends As stated above, dividend is an indicator of shareholder value creation. Through dividends, each stockholder is compensated for holding the company's stock. It is