Analyst Dividend Forecasts and Their Usefulness to Investors: International Evidence
58 Pages Posted: 21 Oct 2015 Last revised: 9 Nov 2016
Date Written: October 21, 2015
In contrast to the disappearing dividends view, we predict that variability in dividend payments increases investor demand for dividend information and analysts respond to this demand by producing informative dividend forecasts. We examine dividend payers from 16 countries spanning 2000–2013 and find that only 25% of firms exhibit sticky dividends, while the majority either increase (54%) or decrease (21%) dividends. Dividend forecasts are available for 87.9% of all dividend-issuing firms and their availability increases with dividend variability. Dividend estimates are useful to investors because they (i) are more accurate and better aligned with market dividend expectations than other surrogates, (ii) convey incremental information beyond that contained in other fundamentals, and (iii) help investors interpret the persistence of earnings news.
Keywords: analyst dividend forecasts; dividend forecast accuracy; information content of dividend forecasts
JEL Classification: G15; G38; M40
Suggested Citation: Suggested Citation