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The Role of Payout Ratio in the Relationship Between Stock Returns and Dividend Yield

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  • Ian McManus
  • Owain ap Gwilym
  • Stephen Thomas

Abstract

Abstract: This paper examines the relationship between returns and dividend yield in the UK stock market, and introduces earnings-related data to the asset pricing model in the form of payout ratio. The latter has a considerable effect upon the inferences which would otherwise be drawn from a study of the dividend yield-returns relationship in the absence of such earnings information. Payout ratio conveys additional signalling information and is an important adjunct to dividend yield in explaining returns. Copyright Blackwell Publishers Ltd, 2004.

Suggested Citation

  • Ian McManus & Owain ap Gwilym & Stephen Thomas, 2004. "The Role of Payout Ratio in the Relationship Between Stock Returns and Dividend Yield," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(9-10), pages 1355-1387.
  • Handle: RePEc:bla:jbfnac:v:31:y:2004-11:i:9-10:p:1355-1387
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Antje Henne & Sebastian Ostrowski & Peter Reichling, 2007. "Dividend Yield and Stability versus Performance at the German Stock Market," FEMM Working Papers 07017, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    2. Kumar, Satish, 2017. "New evidence on stock market reaction to dividend announcements in India," Research in International Business and Finance, Elsevier, vol. 39(PA), pages 327-337.
    3. Huang, Chin-Sheng & You, Chun-Fan & Lin, Szu-Hsien, 2009. "Cash dividends, stock dividends and subsequent earnings growth," Pacific-Basin Finance Journal, Elsevier, vol. 17(5), pages 594-610, November.
    4. Antje Henne & Sebastian Ostrowski & Peter Reichling, 2009. "Dividend yield and stability versus performance on the German stock market: a descriptive study," Review of Managerial Science, Springer, vol. 3(3), pages 225-248, November.

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