Dividend premium: Are dividend-paying stocks worth more? |
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| Institution: | 1. Accounting & Finance, Adelaide Business School, The University of Adelaide, Level 12, 10 Pulteney Street, Adelaide, SA 5005, Australia;2. Department of Applied Finance and Actuarial Studies, Faculty of Business and Economics, Macquarie University, E4A, Eastern Road, North Ryde, NSW 2109, Australia;1. Department of Accounting, Cleveland State University, United States;2. Department of Finance, Florida Atlantic University, United States;3. Department of Economics and Finance, West Chester University of Pennsylvania, United States |
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| Abstract: | This paper reports that the relation between dividend payout and firm value is positive. Panel data regressions suggest that the dividend premium for firms' equity is 17.4% and the dividend premium for firms' assets is 7.1%. The tests using propensity score matching methodology report a lower – but still positive and statistically significant – dividend premium: 12.5% for equity and 6.1% for assets. Thus, stock prices of dividend payers are greater by 12.5% or 17.4% on average (depending on methodology) compared to those of nonpayers. We find that policy-related economic uncertainty and the proportion of firms paying dividends explain more than half of the variation in dividend premium for assets. |
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