Netflix analyses of dividend policy, CAPM beta review and Portfolio theories
Dividend policy review:
a. Provide an overview of Netflix’s dividend policy of the last 5 years (2015 until 2019). When and why did Netflix:
i. pay a cash dividend?
ii. perform a share repurchase?
iii. perform a stock split?
iv. perform a reverse stock split?
b. Can you find any evidence for the presence of a clientele effect? What would even
constitute evidence in this case?
c. Does Netflix engage in a so-called “high dividend policy”? Why or why not? Which
evidence do you find?
d. Do you see any evidence that Netflix acts upon shareholder pressure? Which evidence
can you present?
2.) Risk review:
a. Calculate Netflix’s CAPM beta coefficient and provide an interpretation
b. Compare Netflix’s CAPM efficient to the beta of its main competitor and explain in
detail:
i. how you calculated Netflix’s beta,
ii. which input parameters you used,
iii. the data of which period you processed (Hint: you need not stick to 5 years here!),
and
iv. how you selected the main competitor (Note: you need not calculate the beta of the
main competitor as well – you may look it up)
v. Which of the 2 firms is the riskier investment in your opinion? Why?
3.) Portfolio theory:
Imagine a portfolio consisting of any full percentage (0% – 100%) of Netflix stock (NFLX) and any full percentage of fellow NASDAQ listed firm Wynn Resorts (WYNN). This means you could have a “portfolio” consisting only of Netflix stocks, only of Wynn Resort stocks or any mix in between.
a. Calculate and interpret the average returns of Netflix and Wynn Resort stocks individually using stock price data from the last 5 years.
b. Calculate and interpret the standard deviations of Netflix and Wynn Resort stocks returns
individually using stock price data from the last 5 years.
c. Plot all possible portfolios resulting from the combinations of the stocks of Netflix and
Wynn Resorts in a risk-return diagram. Indicate the minimum variance portfolio (MV), the
opportunity set (a.k.a. the feasible set), the efficient frontier as well as the inefficient
frontier (a.k.a. the “idiot curve”).
d. Imagine you could only use stock price data from the last 4 months (starting November
2019). How and why would your risk-return diagram change?
