The Dog Has Barked for a Long Time: Dividend Growth Is Predictable

Posted: 16 Mar 2016 Last revised: 5 Jul 2017

See all articles by Andrew L. Detzel

Andrew L. Detzel

University of Denver - Daniels College of Business

Jack Strauss

University of Denver - Reiman School of Finance; University of Denver

Date Written: September 22, 2016

Abstract

Motivated by the Campbell-Shiller present-value identity, we propose a new method of forecasting dividend growth that combines out-of-sample forecasts from 14 individual predictive regressions based on common return predictors. Combination forecast methods generate robust out-of-sample predictability of annual dividend growth over the entire post-war period as well as most sub-periods with out-of-sample R2 up to 18.6%. The dividend-growth forecasts coupled with the dividend-price ratio also significantly forecast annual excess returns with out-of-sample R2 up to 12.4%. In spite of robust dividend predictability, we find that most variation in the dividend-price ratio is still attributable to variation in expected returns.

Keywords: Dividend growth, Return predictability

JEL Classification: G12, G17

Suggested Citation

Detzel, Andrew L. and Strauss, Jack, The Dog Has Barked for a Long Time: Dividend Growth Is Predictable (September 22, 2016). Available at SSRN: https://ssrn.com/abstract=2748378 or http://dx.doi.org/10.2139/ssrn.2748378

Andrew L. Detzel (Contact Author)

University of Denver - Daniels College of Business ( email )

2101 S. University Blvd
Denver, CO 80208
United States

HOME PAGE: http://portfolio.du.edu/adetzel

Jack Strauss

University of Denver - Reiman School of Finance ( email )

2101 S. University Blvd
Denver, CO COLORADO 80126
United States
314 602 7265 (Phone)

University of Denver ( email )

2201 S. Gaylord St
Denver, CO 80208-2685
United States

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