Dividend Regressions: January 2014
Variables used in the regression
- Dividend
Yield = Dividends per share in most recent year/ Current Stock Price
- Dividend Payout Ratio = Dividends/ Net Income
- Augmented Dividend
Payout Ratio = (Dividends + Buybacks)/ Net Income
- Beta: Regression or Bottom up beta
- Expected
Growth in EPS over next 5 years = Consensus analyst estimate (or your own)
of expected growth in EPS
- Market
Debt to Capital = Debt/ (Debt + Market Value of Equity): If you have
market value for debt, use it. If not, use book value of debt and market
value of equity.
Dividend Yield Regression
Model
Summary
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Model
|
R
|
R
Square
|
Adjusted
R Square
|
Std.
Error of the Estimate
|
1
|
.560a
|
.314
|
.312
|
119.80360%
|
a. Predictors: (Constant), Market Debt
to Cap, Expected Growth in EPS (next 5 years), Regression Beta
|
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Coefficientsa,b
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Model
|
Unstandardized
Coefficients
|
Standardized
Coefficients
|
t
|
Sig.
|
||
B
|
Std.
Error
|
Beta
|
||||
1
|
(Constant)
|
0.0383
|
.094
|
|
40.688
|
.000
|
Regression Beta
|
-.0145
|
.00087
|
-.455
|
-16.628
|
.000
|
|
Expected Growth in EPS (next 5 years)
|
-.0580
|
.006
|
-.266
|
-10.247
|
.000
|
|
Market Debt to Cap
|
-.0120
|
.002
|
.184
|
6.667
|
.000
|
|
a. Dependent Variable: Dividend Yield
|
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b. Weighted Least Squares Regression -
Weighted by Market Cap
|
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- How do I use this regression?
Assume that you want to estimate the dividend yield for a firm with the following characteristics:
Expected growth in EPS = 10%
Regression beta = 1.20
Expected Growth in EPS over next 5 years = 12%
Market Debt to Capital = 20%
- Predicted Value
Expected Dividend yield = .0383 - 0.145 (1.20) - .058 (.12) - .012 (.20) = 1.15%
If your predicted value is less than zero, your predicted dividend yield is zero.
Augmented Dividend Payout Regression
Model
Summary
|
||||
Model
|
R
|
R
Square
|
Adjusted
R Square
|
Std.
Error of the Estimate
|
1
|
.378a
|
.143
|
.142
|
51.45390
|
a. Predictors: (Constant), Regression
Beta, Expected Growth in EPS (next 5 years), Market Debt to Cap
|
||||
Coefficientsa,b
|
||||||
Model
|
Unstandardized
Coefficients
|
Standardized
Coefficients
|
t
|
Sig.
|
||
B
|
Std.
Error
|
Beta
|
||||
1
|
(Constant)
|
.754
|
.037
|
|
20.646
|
.000
|
Expected Growth in EPS (next 5 years)
|
-.007
|
.002
|
-.098
|
-4.176
|
.000
|
|
Market Debt to Cap
|
.007
|
.001
|
.242
|
9.851
|
.000
|
|
Regression Beta
|
-.460
|
.034
|
-.321
|
-13.521
|
.000
|
|
a. Dependent Variable: AdjPayoutratio
|
||||||
b. Weighted Least Squares Regression -
Weighted by Market Cap
|
||||||
- How do I use this regression?
Assume that you want to estimate the dividend payout ratio for a firm with the following characteristics:
Regression beta = 1.20
Expected Growth in EPS over next 5 years = 12%
Market Debt to Capital = 20%
- Predicted Value
Expected Dividend payout ratio= 0.754 - .007 (.12) +.007 *.20 - 0.460 (1.20) = .2026 or 20.26%
If your predicted value is less than zero, your predicted dividend payout ratio is zero.