IDEAS home Printed from https://ideas.repec.org/a/bla/jbfnac/v27y2000i3-4p261-281.html
   My bibliography  Save this article

Dividend Stability, Dividend Yield and Stock Returns: UK Evidence

Author

Listed:
  • Owain ap Gwilym
  • Gareth Morgan
  • Stephen Thomas

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.

Suggested Citation

  • Owain ap Gwilym & Gareth Morgan & Stephen Thomas, 2000. "Dividend Stability, Dividend Yield and Stock Returns: UK Evidence," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 27(3‐4), pages 261-281, April.
    • Handle: RePEc:bla:jbfnac:v:27:y:2000:i:3-4:p:261-281
    DOI: 10.1111/1468-5957.00313
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1468-5957.00313
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1468-5957.00313?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ye, Qing & Turner, John D., 2014. "The cross-section of stock returns in an early stock market," International Review of Financial Analysis, Elsevier, vol. 34(C), pages 114-123.
    2. Pang, Wan Kai & Yu, Bosco Wing-Tong & Troutt, Marvin D. & Hou, Shui Hung, 2008. "A simulation-based approach to the study of coefficient of variation of dividend yields," European Journal of Operational Research, Elsevier, vol. 189(2), pages 559-569, September.
    3. Alain Durré & Pierre Giot, 2007. "An International Analysis of Earnings, Stock Prices and Bond Yields," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(3‐4), pages 613-641, April.
    4. Grassetti, Francesca & Mammana, Cristiana & Michetti, Elisabetta, 2022. "Nonlinear dynamics in real economy and financial markets: The role of dividend policies in fluctuations," Chaos, Solitons & Fractals, Elsevier, vol. 160(C).
    5. Antje Henne & Sebastian Ostrowski & Peter Reichling, 2007. "Dividend Yield and Stability versus Performance at the German Stock Market," FEMM Working Papers 07017, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    6. Stuart Archbold & Elisabete F. Simões Vieira, 2010. "Corporate Dividend Policies in Bank-based and Market-based Systems: Survey Evidence from UK and Portugal," Portuguese Journal of Management Studies, ISEG, Universidade de Lisboa, vol. 0(1), pages 34-64.
    7. Leif Beisland & Dennis Frestad, 2013. "How fair-value accounting can influence firm hedging," Review of Derivatives Research, Springer, vol. 16(2), pages 193-217, July.
    8. Ali, Heba & Hegazy, Aya Yasser, 2022. "Dividend policy, risk and the cross-section of stock returns: Evidence from India," International Review of Economics & Finance, Elsevier, vol. 79(C), pages 169-192.
    9. Roland Gillet & Marc‐André Lapointe & Philippe Raimbourg, 2008. "Dividend Policy and Reputation," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 35(3‐4), pages 516-540, April.
    10. Kumar, Satish, 2017. "New evidence on stock market reaction to dividend announcements in India," Research in International Business and Finance, Elsevier, vol. 39(PA), pages 327-337.
    11. Zijian Cheng & Charles P. Cullinan & Zhangxin (Frank) Liu & Junrui Zhang, 2021. "Cross‐listings and dividend size and stability: evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(1), pages 415-465, March.
    12. Ian McManus & Owain Ap Gwilym & Stephen Thomas, 2004. "The Role of Payout Ratio in the Relationship Between Stock Returns and Dividend Yield," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(9‐10), pages 1355-1387, November.
    13. Antje Henne & Sebastian Ostrowski & Peter Reichling, 2009. "Dividend yield and stability versus performance on the German stock market: a descriptive study," Review of Managerial Science, Springer, vol. 3(3), pages 225-248, November.
    14. Safari, Meysam, 2009. "Dividend Yield and Stock Return in Different Economic Environment: Evidence from Malaysia," MPRA Paper 23841, University Library of Munich, Germany.
    15. Safari, Meysam & TahmooresPour, Reza, 2011. "Moderation Effect of Market Condition on the Relationship between Dividend Yield and Stock Return," MPRA Paper 28913, University Library of Munich, Germany.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jbfnac:v:27:y:2000:i:3-4:p:261-281. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0306-686X .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.