Preference for dividends and stock returns around the world
2022 Financial Management Association (FMA) Annual Conference
79 Pages Posted: 10 Nov 2022 Last revised: 24 Oct 2024
Date Written: December 1, 2021
Abstract
We find strong international evidence favoring dividend payouts as a salient stock characteristic affecting future stock returns. We find that dividend-paying stocks outperform nonpayers by an average of 0.58% per month, adjusting for exposure to global and regional risk factors and the dividend premium is not explained by local tax rates. We show that the dividend premium comes from the payers’ superior performance during ex-dividend days and the inflated ex-dividend month return partially reverses in the following month. The dividend premium co-moves across stock markets, especially between stock markets where ex-dividend dates are clustered in the same calendar month, and it is higher following market downturns. Collectively, our evidence points to dividend premium reflecting investor demand for dividends, and the price pressure during dividend payment months.
Keywords: Dividend premium, Return comovement, International studies, Asset pricing
JEL Classification: G12, G35, N20
Suggested Citation: Suggested Citation