Dividend Predictability Around the World

Abstract

We show that dividend growth predictability by the dividend yield is the rule rather than the exception in global equity markets. Dividend predictability is weaker, however, in large and developed markets where dividends are smoothed more, the typical firm is large, and volatility is lower. Our findings suggest that the apparent lack of dividend predictability in the U.S. does not uniformly extend to other countries.Rather, cross-country patterns in dividend predictability are driven by differences in firm characteristics and the extent to which dividends are smoothed.JEL-Classification: G12, G15, F31

Expected returns and expected dividend growth in Europe: Legal origin, institutional, and financial determinants

“…For civil law countries, the opposite result is uncovered; Size is only significant in the expected dividend growth equation. These results reinforce findings in Rangvid, Schmeling, and Schrimpf (2014) where dividend growth was predictable in smaller markets. In contrast to their study where the focus was on predictability, we observe a positive size and activity effect on expected dividend growth.…”

“…Jordan, Vivian, and Wohar (2014) examine monthly return predictability in the case of 14 countries and find that fundamental ratios (such as dividend yield, the earnings-price ratio, and the dividend-payout ratio) have weak predictive power for equity returns compared with macroeconomic variables. Rangvid et al (2014) show that predictability of dividend growth rates is better than return predictability in smaller stock markets. Dividend growth predictability also tends to differ depending on how the portfolios of equities are constructed.…”

Can the Consumption–Wealth Ratio Predict Housing Returns? Evidence from OECD Countries

“…We now turn to the assessment of the role played by specific country characteristics in explaining the predictive ability of cay for future housing risk premium. While this empirical exercise has already been considered with regard to stock return predictability (Rangvid, Schmeling and Schrimpf 2014, Jordan, Vivian and Wohar 2014, Rocha Armada, Sousa and Wohar 2015, our contribution in the context of forecasting housing returns is novel.…”

The Dog Has Barked for a Long Time: Dividend Growth Is Predictable

“…Several studies find dividend-growth predictability in different markets than the aggregate U.S. stock market. Engsted and Pedersen (2010) and Rangvid et al (2014) identify dividend-growth predictability in markets outside of the U.S. using the standard predictive regression approach. Maio and Santa-Clara (2015) show that while aggregate U.S. dividends are difficult to forecast with the dividend-price ratio, those of small-cap and value stocks are much easier to forecast, though they only present results in sample.…”

“…See for instance, work byMenzly, Santos and Veronesi (2004),Lettau and Ludvigson (2005),Ang and Bekaert (2007),Cochrane (2008),Chen (2009), van Binsbergen andKoijen (2010),Engsted and Pedersen (2010),Golez (2014),Rangvid, Schmeling and Schrimpf (2014).…”