Dividend Regressions: January 2021

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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. 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.

US Regression: Dividend Yield

US Regression Output

US Regression: Dividend Payout

Regression Output

Global Regression: Dividend Yield

Regression Output

Global Regression: Dividend Payout

Regression Output

• 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:

Regression beta = 1.20

Expected Growth in EPS over next 5 years = 10%

• Predicted Values
• Expected Dividend Yield =2.02 + 0.208 (1.20) - .059 (10) = 1.6796 or 1.68%
• Expected Dividend payout ratio = 68.84 - 12.50(1.20) - 1.30(10) =  40.84 or 40.84%

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