Dividends, earnings, and predictability

Stig V. Møller and Magnus Sander

Journal of Banking & Finance, 2017, vol. 78, issue C, 153-163

Abstract: We show that the dividend yield and earnings yield jointly are strong predictors of dividend growth. We motivate the joint specification with a theoretical model and show how omitting the earnings yield biases the dividend yield coefficient towards zero, explaining why the dividend yield by itself is a poor predictor of dividend growth. Our empirical results are robust in pre- and post-war U.S. data, in recessions and expansions, in international data, and when controlling for additional predictors.

Keywords: Dividend yield; Earnings yield; Dividend growth predictability; Omitted variable bias (search for similar items in EconPapers)
JEL-codes: E44 G12 G17 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:78:y:2017:i:c:p:153-163

DOI: 10.1016/j.jbankfin.2017.02.008

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