Changes in Both Dividends Per Share and Important Characteristics of Dividend Paying Firms Over Time

Abstract

The market break of 2000 appears to have changed how companies perceive dividends. This study shows dividends appear to be more important during the post-2000 period. While some financial variables had significant relationships with dividends per share (DPS) over both pre-2000 and post-2000 periods, others such as current ratio, beta risk measure, and net profit had significant relationships with DPS in only one period. This knowledge may help investors improve decisions regarding dividend-paying firms.

Firm Characteristics Over Time by Dividend Payment Pattern and Firm Size

“…Appropriate variables are shown to be key characteristics necessary for use in this current study. Havranek et al (2009) demonstrate market/book value, size of assets, number of shares outstanding and debt ratio are all significant variables related to dividends per share in both periods of the study. Net profit is only significant after 2000.…”

Dividend Stability and Firm Characteristics

“…Appropriate variables are shown to be key characteristics necessary for use in this current study. Havranek, Consler, and Lepak (2009) show that dividends per share declined prior to 2000 and increased thereafter. The market break of 2000 appears to have changed how investors perceive dividends.…”

“…Now that three groups have been established, representing three dividend theories, the purpose here is to investigate if degree of dividend stability for a firm has any relationship to growth rates of key firm characteristics: market to book value ratio, total assets, net income or loss, common shares outstanding, current ratio, and debt ratio. These variables have been chosen based upon results from three prior studies (Fama and French, 2001;Consler and Lepak, 2007;Havranek, Consler, and Lepak, 2009). Fama and French (2001) provide the best study of firm characteristics relevant to dividends.…”