The evolution of corporate payout in Canada

Abstract

We document changes in the aggregate percentage and number of dividend-paying Canadian firms from 1989 to 2021 and observe a disappearing and partially reappearing dividend phenomenon similar to that in the United States. Unlike the US experience, in Canada, the number and percentage of dividend-paying firms are consistently higher than those of repurchasing firms throughout the sample period. Further, in Canada, the changes are driven by changes in the number of listed firms before and after the bursting of the internet bubble and the effects of the global financial crisis, which we call the new listing effect. The numbers are also affected by a tax change directed at income trusts and the change in the number of firms in the oil, gas, and mining sectors. In predicting a firm's dividend status based on firm-level characteristics, unlike recent US research, we find that the life-cycle theory, as measured by cumulative retained earnings and earnings volatility, plays an important role in explaining dividend status.