EasyJet promises dividends....

I recently had the good fortune to visit the London School of Economics to do some guest lectures on "Reading and Understanding the Financial Times". This was the first time I had been back to LSE since I had been a student there in the early 1980s. The many students who came to my sessions were very impressive with such a strong focus on their current studies as well their future careers. Indeed I focused on showing them how to interpret current FT stories as many of them were busy preparing for internship interviews. I am sure they will be very successful in securing many of the good opportunities available in the investment banks and other financial institutions. So I would like to thank the Presidents of the "Finance" and "Investment" societies in particular for the invitation to go back to LSE. This latest update to my website is dedicated to all the students that came to see me speak....

So now to business... In the latest edition of the book I have included a new story on the outlook for EasyJet (page 15). I can now update that story with reference to today's FT. If you read page 22 of the "Companies and Markets" section you will see an excellent article focusing on the company's new Chief Executive (Carolyn McCall) who gave an update on the company's prospects. It was largely good news with a sharp rise in profits and the headline decision to start paying dividends for the first time ever. This is a powerful signal of the growing maturity of the business and the clear confidence that the company's profitability will remain strong in the future. If you read pages 147-149 of the book you will see how dividend announcements play an important role in corporate finance. At the bottom of page 148 I discuss the "information content" of dividend announcements. In this case the decision to announce the start of dividend payments is a clear signal from the new boss of EasyJet that she is confident that the company can maintain these payments in the future. If she had any serious doubts about this there is no way a decision to start paying dividends would have been made. So as you can see these sorts of announcements are very important in practice as well as in corporate financial theory.