Year of Graduation
Companies` Dividend Information and Possibilities of Creating Investment Strategies
Dividends has always played an important role in the financial market, bringing income to the shareholders and attracting investors. Still not defined the nature of dividends and the exact cause of their payment. Dividends often continue due to the long standing tradition of companies. Managers are afraid to stop or at least to reduce dividend payments even during the difficult financial situation of the company, fearing a negative reaction of shareholders. In financial theory assumed that the dividend paying company reached the stage of maturity, which haven`t opportunities for growth, with growth rates above the average. Thus, one would anticipate a weak growth of such companies and, accordingly, low profitability of these companies ' shares. Despite this fact, as practice shows, in most cases, shares of companies with high dividend outperform the market. The most famous example of this situation can be the "dogs of the Dow" strategy, which has developed in the U.S. market, which proposes to invest in companies with the highest dividend yield. In this paper there is a review of studies that examined this strategy on different markets, as well as possible ways of its improvement. Then the analysis of the effectiveness of these strategies on 3 securities markets of developing countries from 2006 to 2013. For the market of Poland and Turkey 3 investment portfolios are built on the basis of: securities with the highest dividend yield, securities with a high, but not the highest dividend yield, securities with the highest growth of dividend yield for the last period. For the Brazilian market in addition to the three above strategies the 4th portfolio is built based on the highest forecasted future dividends, which are obtained from the model constructed on the basis of the previous year. Regression model shows the dependence of future dividend yield on dividends of two previous periods, and changes in indicators such as total assets, EBITDA, free cash, return on capital, capital expenditures and debt level. These strategies are compared with the main index of the country in which the research experiment is performed. For comparison the yields of the portfolio, the Sharpe ratios and VaR are used. The results showed strong fluctuations in the yield of these strategies in different years. It is concluded that the worst results shows strategy based on the changes dividend yield. Portfolio of companies with the highest dividend yields also showed negative results. The efficiency of its use varies depending on the choice of a particular country. The most stable and reliable turned out to be a strategy for investing in stocks with high but not the highest dividends. However, it can`t beat the market on a regular basis, so I can`t call it effective. The best results showed the portfolio based on the expected future dividends, but he lost the market in terms of VaR. Moreover, this strategy has been tested only on the stock market in Brazil, where all the strategies showed themselves well.