Abstract

This paper examines the accuracy of analysts’ dividend forecasts. Specifically, we investigate the accuracy of analysts’ dividend forecasts and compare with dividend forecasts based on timeseries methods. We further identify the variables that can affect accuracy of analysts’ dividend forecasts. Recently, the interest on dividend payout in Korea is getting grow since the dividend payout ratio becomes greater than interest rate. This leads investors to pay more attention to dividend policy of firms. In addition, investors are interested in predicting dividends for their investment decisions. Despite growing interest to dividend forecasts, there is little study to find out characteristics of dividend forecasts. This paper tries to explore analysts’ dividend forecasts in terms of accuracy. Using dividend forecasts from 2011 to 2015, this paper finds that analysts’ dividend forecasts are more accurate than dividend forecasts from time－series methods. This paper further tests the effect of dividend payout ratio on analysts’ dividend forecasts. We find that accuracy of analysts’ dividend forecast is affected by the level of dividend payout ratio after controlling for variables that affect analyst’ forecast accuracy. It suggests that the level of dividend payout ratio influences analysts’ dividend forecasts. The findings of this paper provide the evidence that analysts’ dividend forecasts are more accurate than time－series method and dividend policy of a firm influences analysts’ dividend forecast characteristics.

Keywords

• Dividend Forecast
• Analysts
• Accuracy
• Dividend payout ratio

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