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Dividends, earnings, and predictability
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DOI：10.1016/j.jbankfin.2017.02.008.png)
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Abstract
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We show that the dividend yield and earnings yield jointly are strong predictors of dividend growth. We motivate the joint specification with a theoretical model and show how omitting the earnings yield biases the dividend yield coefficient towards zero, explaining why the dividend yield by itself is a poor predictor of dividend growth. Our empirical results are robust in pre- and post-war U.S. data, in recessions and expansions, in international data, and when controlling for additional predictors. (C) 2017 Elsevier B.V. All rights reserved.
Keywords:
Dividend yield
Earnings yield
Dividend growth predictability
Omitted variable bias
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