Minicase Dividend Policy
Dividend Policy
DEANNA PEREZ FASHIONS, INC.
Directed
As a young adult in her mid-twenties, Deanna Perez emigrated from Spain with her family to New
York City in the early 1950s. Deanna was artistically inclined and loved women’s fashions. Even as a young girl, Deanna had spent hours drawing, designing, and sewing outfits for her dolls; consequently, it was no surprise to her family when she took a job in the fashion industry. It was
Deanna’s dream to someday be successful, wealthy, and own her own company.
Deanna worked for a few years as an apprentice for various well-known fashion designers, but she grew frustrated because her creativity was being suppressed more and more frequently. She decided that it was time for her to venture out on her own. During her apprenticeship years, she had built quite a reputation as a designer and had managed to save some money so that she could invest in her own firm. In 1960, with her savings and some borrowed funds, she founded Deanna Perez
Fashions (DPF).
DPF’s initial target market was the high-quality, high-priced end of the fashion market, and with
Deanna’s fresh new ideas the firm was virtually an overnight success. Deanna didn’t let success get to her head; she continued to come up with new fashion ideas and to broaden her market niche. As more and more women entered the workplace, DPF focused on quality, medium-priced women’s suits and casual wear, which were very fashionable and were well received in the marketplace. From
1960–1980, the firm’s EPS grew at an average rate of 13 percent per year. Since then, earnings growth has slowed. Initially, DPF financed exclusively with debt and internal funds. However, in 1965 the company issued stock and went public. The 1965 issue reduced Deanna’s ownership interest to 80 percent.
The company continued to grow, but at a slower rate, as did the entire apparel industry. Business soared during expansions and slowed during recessions. Also, DPF was always on the
DEANNA PEREZ FASHIONS, INC.
Directed
As a young adult in her mid-twenties, Deanna Perez emigrated from Spain with her family to New
York City in the early 1950s. Deanna was artistically inclined and loved women’s fashions. Even as a young girl, Deanna had spent hours drawing, designing, and sewing outfits for her dolls; consequently, it was no surprise to her family when she took a job in the fashion industry. It was
Deanna’s dream to someday be successful, wealthy, and own her own company.
Deanna worked for a few years as an apprentice for various well-known fashion designers, but she grew frustrated because her creativity was being suppressed more and more frequently. She decided that it was time for her to venture out on her own. During her apprenticeship years, she had built quite a reputation as a designer and had managed to save some money so that she could invest in her own firm. In 1960, with her savings and some borrowed funds, she founded Deanna Perez
Fashions (DPF).
DPF’s initial target market was the high-quality, high-priced end of the fashion market, and with
Deanna’s fresh new ideas the firm was virtually an overnight success. Deanna didn’t let success get to her head; she continued to come up with new fashion ideas and to broaden her market niche. As more and more women entered the workplace, DPF focused on quality, medium-priced women’s suits and casual wear, which were very fashionable and were well received in the marketplace. From
1960–1980, the firm’s EPS grew at an average rate of 13 percent per year. Since then, earnings growth has slowed. Initially, DPF financed exclusively with debt and internal funds. However, in 1965 the company issued stock and went public. The 1965 issue reduced Deanna’s ownership interest to 80 percent.
The company continued to grow, but at a slower rate, as did the entire apparel industry. Business soared during expansions and slowed during recessions. Also, DPF was always on the