Stock prices and dividends: A South African perspective

Published in: Investment Analysts Journal
Volume 49, issue 1, 2020 , pages: 1–15
DOI: 10.1080/10293523.2019.1682786
Author(s): Ailie CharterisFinance and Tax, South Africa, Kudakwashe J. ChipunzaPostgraduate student, Graduate School of Economic and Management Sciences, South Africa


The present value model (PVM) is considered a cornerstone of financial theory and practice, yet the limited empirical tests thereof have produced varying results depending on the method used. In addition, these tests have focused principally on developed countries, with little knowledge of the validity of the PVM for developing markets. This study employs firm-level data and advanced panel unit root and cointegration tests to assess the PVM for South Africa using a sample of firms that have consistently paid dividends over the period 1999 to 2018. The results largely support the assertion of the model that the stock price is a function of future dividends but the relationship does not move in perfect harmony.

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