Dividends4Life: Can Dividends Predict Returns?

Can Dividends Predict Returns?

Posted by D4L | Sunday, June 17, 2012 | | 0 comments »

With interest rates at historically low levels, many investors have been lured by the siren song of dividend-paying stocks, especially those with high yields. Wesley Gray and Jack Vogel, authors of the 2012 paper "Dissecting Shareholder Yield," add to the research on this subject, examining different yield metrics.

The dividends plus net repurchases plus net debt paydown metric-- SH/YD -- produced the most robust results over the full period. The authors concluded, "Our evidence corroborates what previous authors have concluded: Dividend yield is no longer an effective metric to predict future returns. We also find evidence that more holistic metrics of yield have stood the test of time, but even their predictive ability has fallen."

Source: CNS News

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