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Dividend stability, dividend yield and stock returns: UK evidence

Dividend stability, dividend yield and stock returns: UK evidence
Dividend stability, dividend yield and stock returns: UK evidence
This paper establishes an empirical role for two measures of dividend stability (as a proxy for dividend policy) in explaining UK stock returns. There is little systematic empirical evidence concerning the relation between dividend stability, dividend yield and stock returns despite the fact that a variety of theoretical models point to dividend policy as an important stock attribute. Here we construct two definitions of dividend stability, one of which involves dividend cuts, and use a sample of all listed UK firms from 1975 to 1997 to explore the relationship between stock returns and a variety of characteristics, including dividend stability. We find an inverse correlation between the stability of past dividend policy and systematic risk. Both stability measures have explanatory power over returns, but this is concentrated in January.
dividend yield, dividend stability, stock returns
0306-686X
261-281
Ap Gwilym, O.
dcad2393-1a8b-4088-8508-cdf45e40816d
Morgan, G.
837bc55b-850e-4f6d-9253-e38781bf5f1e
Thomas, S.
0f83004b-179e-4b71-8374-25345d0e9dad
Ap Gwilym, O.
dcad2393-1a8b-4088-8508-cdf45e40816d
Morgan, G.
837bc55b-850e-4f6d-9253-e38781bf5f1e
Thomas, S.
0f83004b-179e-4b71-8374-25345d0e9dad

Ap Gwilym, O., Morgan, G. and Thomas, S. (2000) Dividend stability, dividend yield and stock returns: UK evidence. Journal of Business Finance and Accounting, 27 (3-4), 261-281.

Record type: Article

Abstract

This paper establishes an empirical role for two measures of dividend stability (as a proxy for dividend policy) in explaining UK stock returns. There is little systematic empirical evidence concerning the relation between dividend stability, dividend yield and stock returns despite the fact that a variety of theoretical models point to dividend policy as an important stock attribute. Here we construct two definitions of dividend stability, one of which involves dividend cuts, and use a sample of all listed UK firms from 1975 to 1997 to explore the relationship between stock returns and a variety of characteristics, including dividend stability. We find an inverse correlation between the stability of past dividend policy and systematic risk. Both stability measures have explanatory power over returns, but this is concentrated in January.

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More information

Published date: 2000
Keywords: dividend yield, dividend stability, stock returns

Identifiers

Local EPrints ID: 37359
URI: https://eprints.soton.ac.uk/id/eprint/37359
ISSN: 0306-686X
PURE UUID: 77277ed8-a073-4d18-b806-0378f2729a16

Catalogue record

Date deposited: 28 Jul 2006
Last modified: 17 Jul 2017 15:42

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