Disappearing dividends

Disappearing dividends: changing firm characteristics or lower propensity to pay?
Eugene F. Fama, Kenneth R. French
Journal of Financial Economics 60 (2001) 3-43
Sample: US companies, 1978-1999
Fraction of publicly traded, non-financial, non-utility (industrial) firms pay dividends
1978: 66.5% (peak)
1999: 20.8%
Three questions of interest
What are characteristics of firms that choose to pay dividends?
Is the decline in the number and percentage of payers caused by a decline in the prevalence of the characteristics identified above?
Have firms possessing characteristics historically typical of payers become less likely to pay?

Disappearing dividends: changing firm characteristics or lower propensity to pay?
Eugene F. Fama, Kenneth R. French
Journal of Financial Economics 60 (2001) 3-43
Answers
1. Relevant characteristics: profitability, investment (growth) opportunities, size
Former payers: distressed, low earnings
Never payers: more profitable than former payers, abundant investment opportunities
Payers: more profitable than never payers, fewer investment opportunities, large size

Disappearing dividends: changing firm characteristics or lower propensity to pay?
Eugene F. Fama, Kenneth R. French
Journal of Financial Economics 60 (2001) 3-43
Answers
2. Surge of new lists (1979) floods market with firms possessing characteristics of never payers
Low profitability, strong growth, small size
3. Regardless of their characteristics, firms have become less likely to pay dividends
“Lower propensity to pay”
Techniques used to establish lower propensity to pay
Logistic regression

Are dividends disappearing? Dividend concentration and the consolidation of earnings
Harry DeAngelo, Linda DeAngelo, Douglas J. Skinner
Journal of Financial Economics 72 (2004) 425-456
Sample: industrial firms from NYSE, AMEX, and NASDAQ (1978-2000)
Real and nominal dividends paid by industrial firms have increased over this period
Reduction in number and percentage of payers comes mainly from loss of small firms
Largest payers have significantly increased dividends
“increase in real dividends paid by firms at the top of the dividend distribution swamps the dividend reduction associated with the loss of many small payers at the bottom”

Are dividends disappearing? Dividend concentration and the consolidation of earnings
Harry DeAngelo, Linda DeAngelo, Douglas J. Skinner
Journal of Financial Economics 72 (2004) 425-456
High and increasing concentration of the dividend supply
2000: 75 firms pay 75% of agg. industrial dividends
Increasing concentration of earnings
2000: 56 firms responsible for:
86.2 % of aggregate industrial earnings
61.4 % of aggregate industrial dividends

Are dividends disappearing? Dividend concentration and the consolidation of earnings
Harry DeAngelo, Linda DeAngelo, Douglas J. Skinner
Journal of Financial Economics 72 (2004) 425-456
Mean real dividend paid
1978: $14.4 million
2000: $39.2 million
Median real dividend paid
1978: $1.4 million
2000: $3.6 million
Increasing gap between mean and median hints at increasing concentration

Dividends And Share Repurchases In The European Union
Henk von Eije
William Megginson
December 2, 2007
Database of over 4100 listed industrial companies from 1989 to 2005 in the fifteen nations that are members of the European Union
Examine the evolution of payout
policy from 1989 to 2005
Conclusion:
the fraction of European firms paying dividends has declined
significantly in recent years, while total real dividends paid have increased.