Do What You Did Four Quarters Ago: Trends and Implications of Quarterly Dividends
61 Pages Posted: 15 Sep 2013 Last revised: 6 Jan 2017
Date Written: January 5, 2017
By analyzing the inter-temporal structure of quarterly dividends, we show that as more firms announce dividend increases exactly every four quarters, dividend policy has become more persistent and more predictable. Recently, nearly 60% of all dividend increases have been announced in four-quarter cycles. Valuation, earnings stability, and size are positively related to the propensity to adopt four-quarter cycles. More importantly, we provide evidence that this structure is incorporated into market participants’ expectations about future dividend announcements. These findings may provide an explanation for two phenomena described in the literature: the declining information content of dividends and the higher degree of dividend smoothing.
Keywords: quarterly dividends, serial dividend changes, information content of dividends, market expectations, speed of adjustment
JEL Classification: G35
Suggested Citation: Suggested Citation