Surprise ! Higher Dividends = Higher Earnings Growth

  title={Surprise ! Higher Dividends = Higher Earnings Growth},
  author={Robert D. Arnott and Clifford S. Asness},
We investigate whether dividend policy, as observed in the payout ratio of the U.S. equity market portfolio, forecasts future aggregate earnings growth. The historical evidence strongly suggests that expected future earnings growth is fastest when current payout ratios are high and slowest when payout ratios are low. This relationship is not subsumed by other factors, such as simple mean reversion in earnings. Our evidence thus contradicts the views of many who believe that substantial… CONTINUE READING
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