Research On The Cost Of Capital, The Sustainable Growth And The Estimation Of Dividend Payout Ratio

Based on analysis about the cost of capital theory, sustainable growth theory and dividend policy, this paper investigates the relationship that a company's cash dividend payout ratio has with the cost of equity capital and the sustainable growth rate and builds an estimation model of sustainable payout rate (SPORM). Its basic idea lies in the following two aspects. When the rate of return on reinvestment of retained earnings can compensate the investor-required rate of return, a restricted sustainable payout rate (RSPOR) will be estimated to guide the company to create greater value and build a risk control mechanism of creating value. Otherwise, an expected sustainable payout rate (ESPOR) will be estimated to guide the company to achieve a performance benchmark of value creation, namely, the cost of equity capital.According to SPORM, respectively, the paper tests the sample of A-share listed companies and the state-controlled listed companies from 2002 to 2006 in Shanghai and Shenzhen Stock Exchange. The result finds that the rate of return on equity can not compensate the cost of equity capital in many listed companies in most years, and the relevant indexes of SPOR is significant different among the industries. But the SPOR characteristics of the state-controlled listed companies are consistent with the listed companies in many aspects. On this basis, the paper takes the cost of equity capital and the sustainable growth rate into account and improves the system of EVA in order to create company value according to the estimation of SPOR. Both the system analysis and its data test indicate that the equity economic value added is low generally in many industries and the efficiency of capital use is lower in Chinese listed companies.Based on above of all, the paper draws some conclusions on the basic paths of the value creating of SPOR, such as construction and improvement of the company's EVA system, continuously improving and maintaining the rate of return on reinvestment of retained earnings, setting up a correct idea of cost of capital, enhancing the ability to dispose of the company's asset, developing and maintaining the capacity of sustainable growth to be conducive to the value creating and strengthening the company's external financing capability and so on.