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Dividend Yield and Stability versus Performance at the German Stock Market

Author

Listed:
  • Antje Henne

    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

  • Sebastian Ostrowski

    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

  • Peter Reichling

    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

Abstract

It is often examined in the literature whether the dividend yields of stocks correlate with their total returns. This paper analyzes the effect of dividend yield on return as well as on risk and on performance of stocks and stock portfolios. Not only the influence of dividend yield but also of dividend stability is subject of our analysis. Furthermore, tax aspects are considered. Our data set comprises daily adjusted stock prices and dividend payment data from the German capital market over the period 2000 to 2006. We use stocks from the HDAX, which include blue chips (DAX), stocks of medium-sized companies (MDAX), and stocks of technology firms (TecDAX). Our findings suggest that the performance generally improves with an increasing dividend yield. However, this result is rather based on risk reduction than on a higher return where risk reduction diminishes by increasing the degree of diversification.

Suggested Citation

  • 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.
    • Handle: RePEc:mag:wpaper:07017
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    dividend yield; dividend stability; diversification; performance;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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