Journal article
Gregory W. Eaton, Bradley S. Paye
Journal of Financial and Quantitative Analysis, 2017
Journal of Financial and Quantitative Analysis, 2017
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DOI
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APA
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Eaton, G. W., & Paye, B. S. (2017). Payout Yields and Stock Return Predictability: How Important Is the Measure of Cash Flow? Journal of Financial and Quantitative Analysis.
Chicago/Turabian
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Eaton, Gregory W., and Bradley S. Paye. “Payout Yields and Stock Return Predictability: How Important Is the Measure of Cash Flow?” Journal of Financial and Quantitative Analysis (2017).
MLA
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Eaton, Gregory W., and Bradley S. Paye. “Payout Yields and Stock Return Predictability: How Important Is the Measure of Cash Flow?” Journal of Financial and Quantitative Analysis, 2017.
BibTeX Click to copy
@article{gregory2017a,
title = {Payout Yields and Stock Return Predictability: How Important Is the Measure of Cash Flow?},
year = {2017},
journal = {Journal of Financial and Quantitative Analysis},
author = {Eaton, Gregory W. and Paye, Bradley S.}
}
Abstract
We compare the stock return forecasting performance of alternative payout yields. The net payout yield produces more accurate forecasts relative to alternatives, including the traditional dividend yield. This remains true even after excluding several years during the Great Depression when issuance was unusually high. The measure of cash flow used to form the yield matters economically. Long-term investors’ hedging demand for stock is considerably reduced when net payout, rather than dividends, serves as the cash-flow measure. An agent relying on an incorrect payout measure is willing to pay an economically significant “management fee” to switch to the optimal policy.
