Characteristics of Industrial Companies Stratified by Dividend Level and Risk

Abstract

This abstract was created post-production by the JFI Editorial Board. The purpose of this study is to identify characteristics of large, industrial, dividend-paying firms in the United States. Several interesting conclusions and future research implications can be drawn from the estimated models based on annual data from 1995 to 2004: (1) as expected, dividend per share changes are positively related to changes in market/book value ratio for the two low dividend level groups; (2) as expected, dividend per share changes are positively related to company size changes for all but the low risk, low dividend group; (3) dividend per share changes are negatively related to debt ratio changes over time only for the high risk, high dividend level group; (4) dividend per share changes are negatively related to changes in common shares outstanding for the two high dividend groups, regardless of risk; and (5) dividend per share changes are positively related to net profit changes only for the high risk, high dividend level group. A five-year moving time span is applied to each group as a means to provide additional insight into parameter changes; however, very few consistent relationships are observed over time. This may be due to the limited sample sizes in each group.

Firm Characteristics Over Time by Dividend Payment Pattern and Firm Size

“…When looking at a sample for future work, it had best include these large, dominant, dividend payers to be relevant. Consler and Lepak (2007) build upon Fama and French's (2001) earlier work. Different characteristics such as price, size, debt level, shares outstanding, and profits are found to vary by risk and dividend level for firms paying dividends.…”

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

“…These firms were found to have no propensity to change their payment of dividends while those with positive retained earnings were more likely to change. Consler and Lepak (2007) build upon Fama and French's (2001) earlier work. Different characteristics such as price, size, debt level, shares outstanding, and profits are found to vary by risk and dividend level for firms paying dividends.…”

“…An event (Chetty and Saez 2005) can have an effect upon level of dividend payment. The level of dividends changes over time (Consler and Lepak 2007). This study builds upon this prior work.…”

Dividend Stability and Firm Characteristics

“…This provides further proof that the study period of 2000 to 2005 should be an appropriate choice where dividends matter. Consler and Lepak (2007) build upon Fama and French's (2001) earlier work. Different characteristics such as price, size, debt level, shares outstanding, and profits are found to vary by risk and dividend level for firms paying 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.…”