Dividend Redux

18 Pages Posted: 5 May 2021

Date Written: May 1, 2021

Abstract

Has dividend equity investing as a style been rendered irrelevant by the recent rise of equities without a payout, or should it remain an important building block in modern portfolios? This paper is an attempt to explore this question, supported by nearly a century of data. Reviewing the history of returns, I find strong evidence demonstrating long-term risk-adjusted return advantages for dividend equities relative to non-payers and the market despite a recent flourish from non-payers. I also find that despite the higher realized average returns and Sharpe ratios for a representative mid-yield dividend category, higher volatility and the relative propensity and size of right-tail outcomes for the market and non-dividend equities, in particular, make periods of relative underperformance not only possible but reasonably probable.

Keywords: dividend, quality, corporate finance, asset pricing

JEL Classification: G11, G12, G35

Suggested Citation

Groenke, Robert, Dividend Redux (May 1, 2021). Available at SSRN: https://ssrn.com/abstract=3837937 or http://dx.doi.org/10.2139/ssrn.3837937

Robert Groenke (Contact Author)

Bahl & Gaynor ( email )

255 E. 5th Street
Suite 2700
Cincinnati, OH 45202
United States

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