Vanishing Stock Dividends
50 Pages Posted: 27 Jan 2016 Last revised: 6 Jul 2021
Date Written: July 4, 2021
Abstract
We document a striking drop in the fraction of U.S. firms paying stock dividends (from 15% in the 1950s to 0.2% in the 2010s). Only one firm still pays stock dividends in 2020. About 50% of payers stop paying them every year, but merely 0.09% of non-payers start paying them in the 2010s, compared to 7.2% in the 1950s. We locate two economic forces behind vanishing stock dividends. First, changing firm characteristics reduce firms’ supply of stock dividends. Second, the growing influence of institutional investors lowers investors’ demand for stock dividends, which are costly to stockholders of levered firms.
Keywords: stock dividends, investor learning, signaling
JEL Classification: G35
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