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Reinvesting Dividends

Author

Listed:
  • Mueller-Dethard, Jan
  • Reinhardt, Niklas
  • Weber, Martin

Abstract

It is a long-standing fact that retail investors largely consume dividends with previous studies estimating consumption rates of up to 75%. Using six different datasets, we show that dividend consumption rates have decreased substantially over time to less than 20%, today. Instead of consumption, we find reinvestments into securities portfolios of up to 80%. We provide evidence that this time trend is driven by the transition from checks to direct deposits for the payout of dividends. While it was easy and tempting to spend dividend checks in the past, today’s dividends sit in brokerage cash positions, waiting to be reinvested.

Suggested Citation

  • Mueller-Dethard, Jan & Reinhardt, Niklas & Weber, Martin, 2023. "Reinvesting Dividends," CEPR Discussion Papers 18657, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18657
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    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G50 - Financial Economics - - Household Finance - - - General
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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