Dividend Regressions: January 2015

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Variables used in the regression

1. Dividend Yield = Dividends per share in most recent year/ Current Stock Price
2. Dividend Payout Ratio = Dividends / Net Income
3. Beta: Regression or Bottom up beta
4. % of shares held by institutions = Percent of outstanding shares held by institutional investors
5. Expected Growth in EPS over next 5 years = Consensus analyst estimate (or your own) of expected growth in EPS . If you don't have an analyst estimate, use your own estimate of expected growth.
6. 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.

US Regression: Dividend Yield

Model Summary^a
Model	R	R Square	Adjusted R Square	Std. Error of the Estimate
1	.483^b	.233	.231	1.43761
a. Broad Group = United States
b. Predictors: (Constant), Beta, Market Debt to Capital Ratio, % held by institutions, Expected growth rate in EPS- Next 5 years

Coefficients^a,b,c
Model		Unstandardized Coefficients		Standardized Coefficients	t	Sig.
		B	Std. Error	Beta
1	(Constant)	.048	.002		27.730	.000
	% held by institutions	-.021	.002	-.249	-10.099	.000
	Expected growth rate in EPS- Next 5 years	-.050	.005	-.229	-9.136	.000
	Market Debt to Capital Ratio	.012	.002	.161	6.558	.000
	Beta	-.008	.001	-.200	-7.634	.000
a. Broad Group = United States
b. Dependent Variable: Dividend Yield
c. Weighted Least Squares Regression - Weighted by Market Cap (in US $)

US Regression: Dividend Payout

Model Summary^a
Model	R	R Square	Adjusted R Square	Std. Error of the Estimate
1	.500^b	.250	.248	23.5862000
a. Broad Group = United States
b. Predictors: (Constant), Beta, Market Debt to Capital Ratio, % held by institutions, Expected growth rate in EPS- Next 5 years

Coefficients^a,b,c
Model		Unstandardized Coefficients		Standardized Coefficients	t	Sig.
		B	Std. Error	Beta
1	(Constant)	.835	.031		27.345	.000
	% held by institutions	-.205	.039	-.148	-5.315	.000
	Expected growth rate in EPS- Next 5 years	-.678	.104	-.185	-6.541	.000
	Market Debt to Capital Ratio	-.039	.032	-.034	-1.235	.217
	Beta	-.222	.019	-.341	-11.434	.000
a. Broad Group = United States
b. Dependent Variable: Payout ratio
c. Weighted Least Squares Regression - Weighted by Market Cap (in US $)

Global Regression: Dividend Yield

Model Summary
Model	R	R Square	Adjusted R Square	Std. Error of the Estimate
1	.428^a	.183	.183	1.69314
a. Predictors: (Constant), ERP for Country, Market Debt to Capital Ratio, Expected growth rate in EPS- Next 5 years, % held by institutions

Coefficients^a,b
Model		Unstandardized Coefficients		Standardized Coefficients	t	Sig.
		B	Std. Error	Beta
1	(Constant)	.040	.002		21.121	.000
	% held by institutions	-.018	.001	-.251	-18.913	.000
	Expected growth rate in EPS- Next 5 years	-.058	.002	-.287	-23.396	.000
	Market Debt to Capital Ratio	.018	.001	.187	15.230	.000
	ERP for Country	.000	.000	-.016	-1.192	.233
a. Dependent Variable: DivYield
b. Weighted Least Squares Regression - Weighted by Market Cap (in US $)

Global Regression: Dividend Payout

Model Summary
Model	R	R Square	Adjusted R Square	Std. Error of the Estimate
1	.335^a	.112	.112	20.1614961
a. Predictors: (Constant), Beta, Expected growth rate in EPS- Next 5 years, Market Debt to Capital Ratio, % held by institutions

Coefficients^a,b
Model		Unstandardized Coefficients		Standardized Coefficients	t	Sig.
		B	Std. Error	Beta
1	(Constant)	.641	.011		57.561	.000
	% held by institutions	-.143	.011	-.185	-12.661	.000
	Expected growth rate in EPS- Next 5 years	-.533	.035	-.218	-15.345	.000
	Market Debt to Capital Ratio	-.054	.015	-.052	-3.566	.000
	Beta	-.067	.005	-.205	-13.685	.000
a. Dependent Variable: Payout ratio
b. Weighted Least Squares Regression - Weighted by Market Cap (in US $)

• How do I use this regression?

Assume that you want to estimate the dividend payout ratio for a firm with the following characteristics, using the US regression:

Institutional holdings= 75% of outstanding stock

Regression beta = 1.20

Expected Growth in EPS over next 5 years = 12%

Market Debt to Capital = 20%

• Predicted Value

Expected Dividend payout ratio= 0.835 - 0.205 (.75) - 678 (.12) - .039 (.20) -.222 (1.20) = .3257 or 32.57%

If your predicted value is less than zero, your predicted dividend payout ratio is zero.