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P/F/62. Dissertation: The UK FTSE Techmark: Dividends, Firm Characteristics, and Future Profitability

WORDS:

7000

DATE:

2002

PRICE:

79.99 GBP

This paper investigates dividend-paying firms and non-dividend paying firms in the UK FTSE Techmark AllShare index. Firstly I attempt to capture some of the characteristics that distinguish dividend paying from non dividend paying companies in this sector. Although we find obvious differences between the two types of companies, whether a company will pay dividends in a particular year is best captured by present year Earnings, ROCE, and Size. Secondly, I examine the characteristics that distinguish firms that have always paid dividends from those that have never paid dividends from 1996 - 2000 (inclusive). I find that ROCE and Size are the only factors that define these two company types. Finally, I investigate whether dividend changes have any information content about the future earnings prospects of the firm. I find that on the whole, a change in dividends does not contain information regarding future increases in earnings. However results support the view that dividend changes contain a modest amount of information regarding the level of earnings in years -1, 0, 1, and 2. Therefore the evidence does not support the view that Dividend increases signify future earnings growth, but rather a permanent shift in earnings as Lintner (1956) suggests.

KEYWORDS: f, dissertation, uk, ftse, techmark, dividends, firm, characteristics, future, profitability,