Dividend Yield and Stability versus Performance at the German Stock Market

Antje Henne (), Sebastian Ostrowski and Peter Reichling
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Antje Henne: Faculty of Economics and Management, Otto-von-Guericke University Magdeburg
Sebastian Ostrowski: Faculty of Economics and Management, Otto-von-Guericke University Magdeburg
Peter Reichling: Faculty of Economics and Management, Otto-von-Guericke University Magdeburg

No 7017, FEMM Working Papers from Otto-von-Guericke University Magdeburg, Faculty of Economics and Management

Abstract: It is often examined in the literature whether the dividend yields of stocks correlate with their total returns. This paper analyzes the effect of dividend yield on return as well as on risk and on performance of stocks and stock portfolios. Not only the influence of dividend yield but also of dividend stability is subject of our analysis. Furthermore, tax aspects are considered. Our data set comprises daily adjusted stock prices and dividend payment data from the German capital market over the period 2000 to 2006. We use stocks from the HDAX, which include blue chips (DAX), stocks of medium-sized companies (MDAX), and stocks of technology firms (TecDAX). Our findings suggest that the performance generally improves with an increasing dividend yield. However, this result is rather based on risk reduction than on a higher return where risk reduction diminishes by increasing the degree of diversification.

Keywords: dividend yield; dividend stability; diversification; performance (search for similar items in EconPapers)
JEL-codes: G11 G14 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2007-07
New Economics Papers: this item is included in nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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