Investigating the Impact of Dividend Yield and Dividend Reputation on Stock Return: Evidence from Egypt

Abstract

The purpose of this research is to investigate the impact of divided reputation and dividend yield on stock returns by using the data selected from the Egyptian Stock Exchange (EGX100) for 58 non-financial companies over the period 2013 to 2022. Additionally, the methodology used to test for relationships between the variables is the GMM model. The findings show that dividend reputation and dividend yield have a negative relationship with stock returns, this suggests that companies with established dividend reputations and higher dividend yields tend to experience lower stock returns over time. These research findings contribute to a deeper understanding of how dividends impact investor decision-making and portfolio management strategies. While dividends are often seen as indicators of financial strength and future prospects, the negative relationship observed here implies that they may not necessarily lead to increased investor confidence and demand for the company, resulting in reduced returns. Additionally, the interaction results show that the moderator has no effect between the variables. Moreover, the results are consistent with Walter's theory of dividend policy and Signaling theory while the results are inconsistent with theory of Dividend Irrelevance and Bird in the Hand theory.