Do Dividend Changes in South Africa Signal Earnings Changes?

J Wolff and Christo Auret

Studies in Economics and Econometrics, 2009, vol. 33, issue 3, 19-38

Abstract: Dividend theory suggests that changes in dividends convey information content about the future earnings of the firm. We examine such a relationship using South African data and find virtually no support for it. It is found using categorical analysis that the size of the dividend increase has a strong positive relationship with current earnings, but fails to predict future earnings with any consistency. Regression analysis shows the presence of a strong relationship between current dividend and earnings changes, but no significant relationships are found between dividend changes and earnings changes one year and two years post dividend change.

Date: 2009
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DOI: 10.1080/10800379.2009.12106471

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