Comments on "On the Informational Content of Dividends"

Abstract

In his paper On the Informational Content of Dividends, Michael Laub disagrees with two aspects of my recent article.1 He disagrees with my specification of an annual dividend model instead of a quarterly dividend model and with my conclusion that the information content of dividends is trivial. Laub bases his views on a reinterpretation of some of my results and on some empirical evidence of his own. In this comment I argue that neither his evidence nor the reinterpretation indicates the superiority of a quarterly dividend model or the nontriviality of the information content in dividends. However, as I indicate in my conclusion, the specification of the dividend-earnings relationship is important, and the result of any dividend information content study depends crucially on the approach used.