Dividends and Buybacks

Should investors be indifferent to dividend impact on stock returns?

In their 1961 paper, “Dividend Policy, Growth, and the Valuation of Shares,” Merton Miller and Franco Modigliani famously established that dividend policy should be irrelevant to stock returns. As they explained it, at least before frictions like trading costs and taxes, investors should be indifferent to $1 in the form of a dividend (causing the stock price to drop by $1) and $1 received by selling shares. This must be true, unless you believe that $1 isn’t worth $1. This theorem has not been challenged since, at least in the academic community.

Can Investment Flows Affect Prices? Yep.

Traditional finance theory suggests that stocks prices always reflect their fair market values based on publicly available information. Or in academic parlance, the "semi-strong" form efficient markets hypothesis serves as the null. What are the implications of this hypothesis? Well, the hypothesis suggests that the only reason a stock price will move is due to a shift in fundamentals (either through a change in expected cash flows or via the discount rate). But what about supply and demand shifts?

Dividends, Stock Prices, and Inflation.

Building on the concepts presented in my Dividends Are Different article, here we present data and observations highlighting the relationship between inflation and 1) company [...]

Dividends are Different

There has been abundant discussion regarding the utility of dividends.[ref]Here are a few examples: dividends, dividends, and more dividends…and Jon See'ds piece on buybacks, if [...]

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