Dividend Changes and Future Profitability

  • Author(s): Doron Nissim, Amir Ziv
  • Published: Dec 17, 2002
  • Pages: 2111-2133
  • DOI: 10.1111/0022-1082.00400

We investigate the relation between dividend changes and future profitability, measured in terms of either future earnings or future abnormal earnings. Supporting “the information content of dividends hypothesis,” we find that dividend changes provide information about the level of profitability in subsequent years, incremental to market and accounting data. We also document that dividend changes are positively related to earnings changes in each of the two years after the dividend change.

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