Dividends, Total Cash Flow to Shareholders, and Predictive Return Regressions

Donald Robertson and Stephen Wright

The Review of Economics and Statistics, 2006, vol. 88, issue 1, 91-99

Abstract: This paper provides new evidence on the predictive power of dividend yields for U.S. aggregate stock returns. Following Miller and Modigliani, we construct a measure of the dividend yield that includes all cash flows to shareholders. We show that this alternative cash-flow yield has strong and stable predictive power for returns, and appears robust to a battery of tests that have been proposed in recent critiques of the predictability literature. © 2006 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Date: 2006
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