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What Difference Do Dividends Make?

Author

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  • C. Mitchell Conover
  • Gerald R. Jensen
  • Marc W. Simpson

Abstract

We evaluate the investment benefits of dividend-paying stocks and identify three major findings. First, high-dividend payers have the least risk yet return over 1.5% more per year than do nondividend payers. Second, the benefit of targeting dividend payers is conditional on investment style. Surprisingly, the benefit is largest for growth and small-cap stocks, the stocks of companies usually thought to benefit the most from reinvesting their cash flows. Third, long–short managers exploiting the value premium should focus on non-dividend-paying stocks as non-dividend-paying small-cap value stocks return 1% more per month than do non-dividend-paying small-cap growth stocks.Editor’s note: This article was reviewed and accepted by Robert Litterman, executive editor at the time the article was submitted.

Suggested Citation

  • C. Mitchell Conover & Gerald R. Jensen & Marc W. Simpson, 2016. "What Difference Do Dividends Make?," Financial Analysts Journal, Taylor & Francis Journals, vol. 72(6), pages 28-40, November.
    • Handle: RePEc:taf:ufajxx:v:72:y:2016:i:6:p:28-40
    DOI: 10.2469/faj.v72.n6.1
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