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

See all articles by Allaudeen Hameed

Allaudeen Hameed

National University of Singapore (NUS) - Department of Finance

Jing Xie

University of Macau, Faculty of Business Administration, Department of Finance and Business Economics

Yuxiang Zhong

Huazhong University of Science and Technology

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

Hameed, Allaudeen and Xie, Jing and Zhong, Yuxiang, Preference for dividends and stock returns around the world (December 1, 2021). 2022 Financial Management Association (FMA) Annual Conference , Available at SSRN: https://ssrn.com/abstract=4263210 or http://dx.doi.org/10.2139/ssrn.4263210

Allaudeen Hameed

National University of Singapore (NUS) - Department of Finance ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore

HOME PAGE: http://bizfaculty.nus.edu.sg/faculty-details/?profId=1

Jing Xie (Contact Author)

University of Macau, Faculty of Business Administration, Department of Finance and Business Economics ( email )

E22-4064, FBA building
Macau
Macau, 000000
China
+853 88224639 (Phone)

HOME PAGE: http://fba.um.edu.mo/faculty/jingxie/

Yuxiang Zhong

Huazhong University of Science and Technology

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