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Preferences for dividends and stock returns around the world

Author

Listed:
  • Allaudeen Hameed

    (NUS Business School, National University of Singapore)

  • Jing Xie

    (Department of Finance and Business Economics, Faculty of Business Administration, University of Macau)

  • Yuxiang Zhong

    (School of Management, Huazhong University of Science and Technology)

Abstract

We find strong international evidence favoring dividend payouts as a salient stock characteristic affecting future stock returns. We find that dividend-paying stocks outperform non-dividendpaying stocks globally by 0.58% per month, adjusting for exposure to global and regional risk factors. The degree of dividend payers’ outperformance relative to non-dividend payers is unrelated to tax rates on dividends. We show that the dividend premium comes from the payers’ superior performance during ex-dividend months and the inflated ex-dividend month return partially reverses in the following month. The dividend premium co-moves across countries, especially between countries where ex-dividend dates are clustered in the same calendar month, and it is higher following market downturns. Collectively, our evidence points to dividend premium reflecting investor demand for dividends, particularly during dividend payment months.

Suggested Citation

  • Allaudeen Hameed & Jing Xie & Yuxiang Zhong, 2024. "Preferences for dividends and stock returns around the world," Working Papers 202405, University of Macau, Faculty of Business Administration.
    • Handle: RePEc:boa:wpaper:202405
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    File URL: https://fba.um.edu.mo/wp-content/uploads/RePEc/doc/202405.pdf
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    More about this item

    Keywords

    Dividend premium; Return comovement; International studies; Asset pricing;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative

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