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