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Dividend behaviour of US equity REITs

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  • Darren K. Hayunga
  • Clifford P. Stephens

Abstract

A new era began for US equity Real Estate Investment Trusts (REITs) around 1992. This study is the first to document the dividend smoothing, determinants of dividend payouts, and the market reaction to dividend announcements of the modern REIT. We find the Lintner (1956) smoothing parameter suggests a high level of dividend smoothing in quarterly data and, although we observe substantially less smoothing in the annual data, modern REITs smooth dividends at least as much as their industrial counterparts. Beyond the dividend paid last period and contemporaneous earnings, usual determinants of dividend behaviour in non‐REIT firms are not economically significant, which is a departure from old‐era REITs. Additionally, as compared with non‐REIT firms, we find muted excess stock returns upon announcements of dividend changes. Overall, our findings suggest that managers set a stable (smooth) dividend policy even in the relative absence of market imperfections.

Suggested Citation

  • Darren K. Hayunga & Clifford P. Stephens, 2009. "Dividend behaviour of US equity REITs," Journal of Property Research, Taylor & Francis Journals, vol. 26(2), pages 105-123, September.
    • Handle: RePEc:taf:jpropr:v:26:y:2009:i:2:p:105-123
    DOI: 10.1080/09599910903441549
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    1. Ebenezer Asem & Vishaal Baulkaran & Pawan Jain & Mark Sunderman, 2022. "Are institutional investors informed? The case of dividend changes for REITS and Industrial Firms," Review of Quantitative Finance and Accounting, Springer, vol. 58(4), pages 1685-1707, May.
    2. Cho, Jin Seo & Kim, Tae-hwan & Shin, Yongcheol, 2015. "Quantile cointegration in the autoregressive distributed-lag modeling framework," Journal of Econometrics, Elsevier, vol. 188(1), pages 281-300.
    3. Fernau, Erik & Hirsch, Stefan, 2019. "What drives dividend smoothing? A meta regression analysis of the Lintner model," International Review of Financial Analysis, Elsevier, vol. 61(C), pages 255-273.

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