Dividend Yield and Stability versus Performance at the German Stock Market
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.
|Date of creation:||Jul 2007|
|Date of revision:|
|Contact details of provider:|| Postal: Universitätsplatz 2, Gebäude W und I, 39106 Magdeburg|
Phone: (0391) 67-18 584
Fax: (0391) 67-12 120
Web page: http://www.ww.uni-magdeburg.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Morgan, Gareth & Thomas, Stephen, 1998. "Taxes, dividend yields and returns in the UK equity market," Journal of Banking & Finance, Elsevier, vol. 22(4), pages 405-423, May.
- Gombola, Michael J & Liu, Feng-Ying L, 1993. "Dividend Yields and Stock Returns: Evidence of Time Variation between Bull and Bear Markets," The Financial Review, Eastern Finance Association, vol. 28(3), pages 303-27, August.
- 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.
- Levis, Mario, 1989. "Stock market anomalies: A re-assessment based on the UK evidence," Journal of Banking & Finance, Elsevier, vol. 13(4-5), pages 675-696, September.
- Philippe Jorion & William N. Goetzmann, 1998.
"A Longer Look at Dividend Yields,"
Yale School of Management Working Papers
ysm41, Yale School of Management.
- Blume, Marshall E, 1980. "Stock Returns and Dividend Yields: Some More Evidence," The Review of Economics and Statistics, MIT Press, vol. 62(4), pages 567-77, November.
- Nelson, Charles R & Kim, Myung J, 1993. " Predictable Stock Returns: The Role of Small Sample Bias," Journal of Finance, American Finance Association, vol. 48(2), pages 641-61, June.
- Christie, William G., 1990. "Dividend yield and expected returns *1: The zero-dividend puzzle," Journal of Financial Economics, Elsevier, vol. 28(1-2), pages 95-125.
- Goetzman, W.N. & Jorion, P., 1992.
"Testing the Predictive Power of Dividend Yields,"
93-03, Columbia - Graduate School of Business.
- Hodrick, Robert J, 1992.
"Dividend Yields and Expected Stock Returns: Alternative Procedures for Inference and Measurement,"
Review of Financial Studies,
Society for Financial Studies, vol. 5(3), pages 357-86.
- Tom Doan, . "OLSHODRICK: RATS procedure to compute Hodrick standard errors," Statistical Software Components RTS00147, Boston College Department of Economics.
- Greg Filbeck & Sue Visscher, 1997. "Dividend yield strategies in the British stock market," The European Journal of Finance, Taylor & Francis Journals, vol. 3(4), pages 277-289.
- Fama, Eugene F. & French, Kenneth R., 1988. "Dividend yields and expected stock returns," Journal of Financial Economics, Elsevier, vol. 22(1), pages 3-25, October.
- Keim, Donald B., 1985.
"Dividend yields and stock returns: Implications of abnormal January returns,"
Journal of Financial Economics,
Elsevier, vol. 14(3), pages 473-489, September.
- Donald B. Keim, . "Dividend Yields and Stock Returns: Implications of Abnormal January Returns," Rodney L. White Center for Financial Research Working Papers 14-85, Wharton School Rodney L. White Center for Financial Research.
- Litzenberger, Robert H. & Ramaswamy, Krishna, 1979. "The effect of personal taxes and dividends on capital asset prices : Theory and empirical evidence," Journal of Financial Economics, Elsevier, vol. 7(2), pages 163-195, June.
- Black, Fischer & Scholes, Myron, 1974. "The effects of dividend yield and dividend policy on common stock prices and returns," Journal of Financial Economics, Elsevier, vol. 1(1), pages 1-22, May.
- Gombola, Michael J & Liu, Feng-Ying, 1993. "Considering Dividend Stability in the Relation between Dividend Yields and Stock Returns," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 16(2), pages 139-50, Summer.
When requesting a correction, please mention this item's handle: RePEc:mag:wpaper:07017. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guido Henkel)
If references are entirely missing, you can add them using this form.