Dividend policy and target payout ratios

Article Abstract:

The dividend policies of 93 large firms listed on the Australian Stock Exchanges are surveyed, especially with respect to the firms' use of target payout ratios (TPRs) and possible associations between payout targets and industry groupings. A firm with a TPR is defined as one which, in the long run, attempts to distribute a more or less fixed proportion of profits as dividends. Most of the firms surveyed used explicit TPRs, with the most popular objective being to distribute approximately half of the firm's profits as dividends. However, 41 percent of the firms reported that they made no explicit use of payout targets. Some of the firms with an explicit payout target had changed their targets over a ten to fifteen year period, and these firms had slightly lower targets than firms with unchanged targets. There was no significant association between TPRs and industry classification.

Management, dividends

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Target payout and the association between dividends and share prices

Article Abstract:

Share prices react to the choice of payment of dividends, and respond differently to surprise payout changes depending upon the related corporation's originally targeted payout. Research suggests that this is contingent to the level of payout rates; that is, only high payout expectancy can generate information that will affect share prices. Two models are used to test this hypothesis: the Fama-Babiak model and a model based on one analyst's forecasts of dividends. Results indicate that unexpected dividend increases generate a greater informational impact on share prices than do low payouts.

Research, Economic aspects, Stocks, Stock-exchange, Stock exchanges

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The foreign exchange operating exposure of Australian stocks

Article Abstract:

This paper provides empirical evidence on the stock return sensitivity of a sample of Australian companies, to changes in the trade weighted index of the Australian dollar during the post float period January, 1984 - December, 1989. Exposure is estimated using time regression methods. While the evidence of exposure is generally weak, there is evidence that resource stocks and industrial stocks respond differentially to fluctuations in the Australian dollar. (Reprinted by permission of the publisher.)

Prices and rates, Dollar (Australia), Corporations, Australian

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