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Dividends, earnings, the payout ratio and returns: a century of evidence from the US and UK

Dividends, earnings, the payout ratio and returns: a century of evidence from the US and UK
Dividends, earnings, the payout ratio and returns: a century of evidence from the US and UK
This paper investigates the relationship between real earnings growth, real dividend growth, the dividend payout ratio and real stock returns in the US and UK between 1900-2001. We find a positive relationship in the UK between the payout ratio and subsequent real earnings growth contrary to conventional theory, though consistent with the US evidence presented by Arnott and Asness (2003). By contrast, a negative relationship was observed between the payout ratio and real dividend growth in the UK, although US results offered only limited support for this finding. Overall, we find the payout ratio is negatively related to real returns in the UK.
AF04-14
University of Southampton
ap Gwilym, Owain
dbd356d9-b22d-420b-a980-7341f6d52f34
Seaton, James
b6f37ca8-95a5-4d2b-8f85-33061f2afc7b
Thomas, Stephen
3ebf2346-25f1-4f19-b854-7a7da0cee9ca
ap Gwilym, Owain
dbd356d9-b22d-420b-a980-7341f6d52f34
Seaton, James
b6f37ca8-95a5-4d2b-8f85-33061f2afc7b
Thomas, Stephen
3ebf2346-25f1-4f19-b854-7a7da0cee9ca

ap Gwilym, Owain, Seaton, James and Thomas, Stephen (2004) Dividends, earnings, the payout ratio and returns: a century of evidence from the US and UK (Discussion Papers in Accounting & Finance, AF04-14) Southampton, UK. University of Southampton 37pp.

Record type: Monograph (Discussion Paper)

Abstract

This paper investigates the relationship between real earnings growth, real dividend growth, the dividend payout ratio and real stock returns in the US and UK between 1900-2001. We find a positive relationship in the UK between the payout ratio and subsequent real earnings growth contrary to conventional theory, though consistent with the US evidence presented by Arnott and Asness (2003). By contrast, a negative relationship was observed between the payout ratio and real dividend growth in the UK, although US results offered only limited support for this finding. Overall, we find the payout ratio is negatively related to real returns in the UK.

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More information

Published date: 2004
Additional Information: ISSN 1356-3548

Identifiers

Local EPrints ID: 36135
URI: http://eprints.soton.ac.uk/id/eprint/36135
PURE UUID: cd9150de-7e05-41c0-8bc9-3cb186bc86c8

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Date deposited: 24 May 2006
Last modified: 15 Mar 2024 07:55

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Contributors

Author: Owain ap Gwilym
Author: James Seaton
Author: Stephen Thomas

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