Research On The Estimation Of The Listed Company Sustainable Dividend Payout Ratio Based On Free Cash Flow Of Equity

Sustainable dividend payout rate is the level of dividend payments which fully takes into account the content of the minimum rate of return on shareholders and the sustainable development requirements of the company and effectively solves the principal-agent relationship as well as protecting the interests of minority shareholders, so as to achieving the lowest cost financing and steady growth in company and maximizing the shareholder wealth under the conditions of the target capital structure. It does have positive significance regarding whether the company's own interests or the cultivation of rational concept of the market value of investments and the reinforcement of a sound mechanism for sustainable returns to shareholders. Aiming at the degree of rationality of the dividend policy in China's listed companies, based on the perspective of the free cash flow of equity, directed by Van Horne's model of sustainable growth and Gordon model, the paper designs an estimation model of sustainable dividend payout ratio and selects the real estate listed companies as the study sample of the application and empirical test of the estimation model.It indicates that, according to shareholder wealth maximization theory, market value added theory and the agency cost theory, the factors that determine the level of the sustainable dividend payout ratio including cost of equity capital, sustainable growth and the free cash flow of equity margin. The higher the minimum rate of return required by the shareholder(cost of equity capital) and the weaker the endogenous growth capacity of the company(sustainable growth rate) and the greater the net profit contribution of the free cash flow of equity(free cash flow of equity margin),the higher the sustainable dividend payout ratio; otherwise the lower.In order to test the scientificalness, practicability and stability of the sustainable dividend payout ratio model, this paper take the real estate listed companies in China as the research object. Their sustainable dividend payout ratio from 2006 to 2008 is estimated and grouped by the size of return on equity and cost of equity capital, growth rate of sales and sustainable growth rate, free cash flow of equity and cluster analysis separately and Mann-Whitney non-parametric tested. The results show that, firstly, there is a gap between the actual dividend payout ratio and the estimated sustainable dividend payout ratio in China's real estate listed companies mainly because part of the sample companies cannot better balance the interests of shareholders and the company's long-term development. Secondly, the estimation model of sustainable dividend payout constructed in this paper is consistent with the explanation that shareholder wealth maximization theory, market value added theory and the agency cost theory make to dividend policy and the principles of the dividend decision which the company managers must grasp are the content of the minimum rate of return on shareholders, the demand for capital investment concerning the company's sustainable growth and the impact of the free cash flow of equity. The decision-making behavior of dividend has been more and more rational for the sample company in the sample period, but some local overheating. Thirdly, companies should increase the dividend payout ratio and the share of recurrent profit and loss by improving their operational capacity, profitability, development, cash flow capacity and profitability of the shareholders. Under the premise of re-investment rate of return meeting the return on equity, companies can increase the free cash flow of equity and investment appropriately to achieve the dual purpose of both the maximum of shareholder value and the company sustainable development.The innovation of this paper is that based on the perspective of the free cash flow of equity, it designs and verifies the estimation model of sustainable dividend payout rate on the basis of defining the content and features of the sustainable dividend payout ratio. However, there are certain limitations in the research and conclusions inevitably as the model is built on the assumptions that the company's operating efficiency and financial policy remain unchanged.