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Academic Research Insight: Do Dividends Still Matter?

By Kurt Osterberg · On September 11, 2017

What are the research questions?

Research has shown that dividends constitute a greater contribution to the returns of a value versus a growth strategy. However, the question remains as to whether or not dividends matter within a style category.

For style investors, does dividend policy determine success relative to non-dividend payers while holding investment style constant? When choosing stocks within an investment style, specifically growth, value, small cap, or large cap, does the level and yield of dividends influence the performance of the strategy?

Is there evidence for clientele effects? That is, are stock return patterns associated with the restrictions or preferences that investors place on style selection regarding the level of dividend payments?

Is there an optimal dividend tilt across the range of market capitalizations? As a style, the market cap of a company may influence the risk and return profiles for stocks across various levels of dividend yields. For example, within a market cap strata, do the risk/return profiles differ for low to high dividend yields compared to non-dividend payers?

What are the Academic Insights?