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Ten years of dividend yields in Europe: 2000–2009

Author

Listed:
  • Teresa Corzo Santamaría

    (Universidad de A Coruña, Rúa da Maestranza, 9)

  • Dolores Lagoa-Varela

    (Universidad de A Coruña, Rúa da Maestranza, 9)

  • Inés Portillo García

Abstract

Using monthly data collected during the period 2000–2009 for two samples of European and Spanish companies, we show a clear, nonlinear relationship between dividend yields (DYs) and total stock returns earned by stockholders. This relationship is an inverted, U-shaped relationship in the sense that stocks within a specific range of DY have superior returns and are the only ones with positive average returns throughout our sample period. We also find that stocks within a portfolio with superior and positive returns are the ones that bear lower risk, thus becoming the ones with best Sharpe’ ratios. The relationship between DY and risk exhibit a U-shape. Our results contradict the Miller and Modigliani (1961) irrelevance theorem and reveal the existence of suitable dividend range from the investor’s point of view while supporting the relevance of dividends as an investment tool.

Suggested Citation

  • Teresa Corzo Santamaría & Dolores Lagoa-Varela & Inés Portillo García, 2014. "Ten years of dividend yields in Europe: 2000–2009," Journal of Asset Management, Palgrave Macmillan, vol. 15(2), pages 83-91, April.
    • Handle: RePEc:pal:assmgt:v:15:y:2014:i:2:d:10.1057_jam.2014.14
    DOI: 10.1057/jam.2014.14
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    References listed on IDEAS

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    Cited by:

    1. Ali, Heba & Hegazy, Aya Yasser, 2022. "Dividend policy, risk and the cross-section of stock returns: Evidence from India," International Review of Economics & Finance, Elsevier, vol. 79(C), pages 169-192.

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