11/6/2023
By Charles Payne CEO & Principal Analyst

Wall Street makes a big deal of dividend growers. Companies that raise their dividend payout each year are considered strong and healthy. Those who have done so more than 25 years in a row are considered ‘aristocrats.’ I have been suspicious of this, as I watch games like hiking the dividend by a single penny. 

This is an excellent paper that suggests dividend hibernation can also be good news.

Conclusion

According to the signaling theories of payout policy, dividends serve as a costly signal to communicate private information about earnings or investments to the less-informed outsider. Numerous studies tests signaling theories by relating dividend changes to unexpected future earnings to determine whether they carry information content. In this paper, we ask a different question: If dividend changes transmit information held by insiders, does a constant payout policy also provide information?

To read the full report, contact your account represenative or email Info@wstreet.com.

Charles Payne
Wall Street Strategies

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