## Dividend Regressions: January 2015

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. % of shares held by institutions = Percent of outstanding shares held by institutional investors
5. 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.
6. Market Debt to Capital = Debt/ (Debt + Market Value of Equity): If you have market value for debt, use it. If not, use book value of debt and market value of equity.

US Regression: Dividend Yield

Model Summarya
Model | R | R Square | Adjusted R Square | Std. Error of the Estimate
1 | .483b | .233 | .231 | 1.43761
a. Broad Group = United States
b. Predictors: (Constant), Beta, Market Debt to Capital Ratio, % held by institutions, Expected growth rate in EPS- Next 5 years

Coefficientsa,b,c
Model | Unstandardized Coefficients | Standardized Coefficients | t | Sig.
B | Std. Error | Beta
1 | (Constant) | .048 | .002 |  | 27.730 | .000
% held by institutions | -.021 | .002 | -.249 | -10.099 | .000
Expected growth rate in EPS- Next 5 years | -.050 | .005 | -.229 | -9.136 | .000
Market Debt to Capital Ratio | .012 | .002 | .161 | 6.558 | .000
Beta | -.008 | .001 | -.200 | -7.634 | .000
a. Broad Group = United States
b. Dependent Variable: Dividend Yield
c. Weighted Least Squares Regression - Weighted by Market Cap (in US $)

US Regression: Dividend Payout

Model Summarya
Model | R | R Square | Adjusted R Square | Std. Error of the Estimate
1 | .500b | .250 | .248 | 23.5862000
a. Broad Group = United States
b. Predictors: (Constant), Beta, Market Debt to Capital Ratio, % held by institutions, Expected growth rate in EPS- Next 5 years

Coefficientsa,b,c
Model | Unstandardized Coefficients | Standardized Coefficients | t | Sig.
B | Std. Error | Beta
1 | (Constant) | .835 | .031 |  | 27.345 | .000
% held by institutions | -.205 | .039 | -.148 | -5.315 | .000
Expected growth rate in EPS- Next 5 years | -.678 | .104 | -.185 | -6.541 | .000
Market Debt to Capital Ratio | -.039 | .032 | -.034 | -1.235 | .217
Beta | -.222 | .019 | -.341 | -11.434 | .000
a. Broad Group = United States
b. Dependent Variable: Payout ratio
c. Weighted Least Squares Regression - Weighted by Market Cap (in US $)

Global Regression: Dividend Yield

Model Summary
Model | R | R Square | Adjusted R Square | Std. Error of the Estimate
1 | .428a | .183 | .183 | 1.69314
a. Predictors: (Constant), ERP for Country, Market Debt to Capital Ratio, Expected growth rate in EPS- Next 5 years, % held by institutions

Coefficientsa,b
Model | Unstandardized Coefficients | Standardized Coefficients | t | Sig.
B | Std. Error | Beta
1 | (Constant) | .040 | .002 |  | 21.121 | .000
% held by institutions | -.018 | .001 | -.251 | -18.913 | .000
Expected growth rate in EPS- Next 5 years | -.058 | .002 | -.287 | -23.396 | .000
Market Debt to Capital Ratio | .018 | .001 | .187 | 15.230 | .000
ERP for Country | .000 | .000 | -.016 | -1.192 | .233
a. Dependent Variable: DivYield
b. Weighted Least Squares Regression - Weighted by Market Cap (in US $)

Global Regression: Dividend Payout

Model Summary
Model | R | R Square | Adjusted R Square | Std. Error of the Estimate
1 | .335a | .112 | .112 | 20.1614961
a. Predictors: (Constant), Beta, Expected growth rate in EPS- Next 5 years, Market Debt to Capital Ratio, % held by institutions

Coefficientsa,b
Model | Unstandardized Coefficients | Standardized Coefficients | t | Sig.
B | Std. Error | Beta
1 | (Constant) | .641 | .011 |  | 57.561 | .000
% held by institutions | -.143 | .011 | -.185 | -12.661 | .000
Expected growth rate in EPS- Next 5 years | -.533 | .035 | -.218 | -15.345 | .000
Market Debt to Capital Ratio | -.054 | .015 | -.052 | -3.566 | .000
Beta | -.067 | .005 | -.205 | -13.685 | .000
a. Dependent Variable: Payout ratio
b. Weighted Least Squares Regression - Weighted by Market Cap (in US $)

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- 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:

Institutional holdings= 75% of outstanding stock

Regression beta = 1.20

Expected Growth in EPS over next 5 years = 12%

Market Debt to Capital = 20%

- Predicted Value

Expected Dividend payout ratio= 0.835 - 0.205 (.75) - 678 (.12) - .039 (.20) -.222 (1.20) = .3257 or 32.57%

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