Net payout yields and the cross-section of international stock returns

Abstract

The positive relation between the firm’s net payout yield (NPY) and subsequent stock returns, previously found in the United States, is similarly present in foreign international equity markets. That is, firms with high net payout yields significantly outperform firms with low net payout yields. The observed return effect is robust to common controls, such as firm size, book-to-market and momentum, as well as to recently proposed controls for investment and operating profitability. Consistent with the changing payout behavior of firms around the world, the net payout yield holds more cross-sectional information for predicting subsequent stock returns than the traditional dividend yield.