Research On Long-term Influence Of Dividend Policy To Investment Yield

Since established in the early 1990s, China’s securities market has a rapid development. Equity investment has been one of the most important financial choices of investors. Since 2000, the China Securities Regulatory Commission has issued a series of policies, making dividend policy being one of the conditions for refinancing, which result in a sharp rise in the number of listed companies which paid cash dividends. Therefore, it’s more and more important to analyze the impact of dividend policy to investment yield.We believe that dividend policy has two main effects on the investment yield. On the one hand, stock dividend and cash dividend reinvestment increase the number of stock shares. On the other hand, dividend policy may have influence on the stock price and market value of listed companies. Now the A-share market has reach weak-form market efficiency, which means investors may get excess returns by investing on high dividend yield in long-terms, based on the Value Investment Theory and Dow Theory. We believe that there are many unquantified factors which have influence on investment yield. So we simulated the difference of investing on stocks of different stock policies based on the cash dividend reinvestment, and we believe that represents the influence of stock policy to investment yield. In addition, we analyze whether the stock market cycle fluctuations and differences between different markets have influence on the relationship between stock policy and investment yield.The main conclusions are as follows:First, long-term investment yield of investing on high dividend yield stocks is higher than that of low dividend yield stocks, based on cash dividend reinvestment strategy; Second, the difference of investment yield between high dividend yield stocks and low dividend yield stocks in bear market is higher than bull market, which means stock market cycle fluctuations do have influence on the relationship between stock policy and investment yield. Third, long-term investment yield of investing on high dividend yield stocks is lower than that of low dividend yield stocks in the U.S. stock market, because there are many listed companies which grew fast but paid little cash dividend in U.S. Based on our conclusions, we recommend investors to select stocks of high dividend yield.