Dividend Policy: Determining the Relevancy in Three U.S. Sectors

Abstract

The purpose of this research is to assess the relevance of the dividend policy for thirty U.S. firms in each of the Industrial, Healthcare, and Energy sectors. The Dividend Irrelevance Theory was the applied theoretical framework throughout the duration of the study. Annual dividend and stock price data were collected for the thirty companies in each of the three sectors, from 2001 to 2013. This provided us with 390 observations for each sector. Correlation and regression analysis were applied to further examine the relationship between dividends and stock prices. The findings indicate that there is a statistically significant relationship between stock prices and dividend policy. Thus, these findings provide empirical evidence against the Dividend Irrelevance Theory and provide empirical evidence in support of the Dividend Relevance Theory.