An Investment Analysis On High Stock Dividend Return Rate

Dividend policy is core content of modern corporate activities and attracted much attention from corporate finance field. In 1938, American scholar Williams started the dependent research of dividend policy. In 1961, Miller and Modigliani created famous MM dividend irrelevance theory and established the footstone of dividend policy theory research. Later, many researchers introduced more reality factors to dividend policy study like tax, information asymmetry and agency cost. With the assistance of the research achievements of sociology, psychology and behavioral science, they developed many theories including tax difference theory, clientele effect theory, signaling theory, agency cost theory and catering theory. However, the scholars have not reached agreements even with so many theory research achievements. ‘Dividend puzzle’ still exists.China securities markets have a later start. There is some difference on listed company dividend policy between china market and mature foreign markets. In China A-share market, stock dividends policy is always greatly welcome by investors. There is always a good opportunity by investing high stock dividend companies every year in China A-share market. However, there are few researches on this. Traditionally, the researches on stock dividend market response focus more on short-term abnormal return after information disclosure, while ignoring the long-term performance and real turn. There are even less study on investment model by investing high stock dividend companies.This paper analyzes current situation of China A-share market dividend policy and internal cause, using listed company dividend data after 2005 which is the first year of China share reform. Later, based on the market data between dividend policy forecast date and record date of companies who issued high stock dividend in 2011-2013 annual report, this paper does an empirical study on whether the opportunity by investing high stock dividend company during this period exists. And this paper sets real turn as the target variable to analyze how several independent variables affect the real return with multiple regression. Finally, we set up an investment model of high dividend stock with above results.There are some innovations of analysis orientation and methods of this paper compared with previous researches. First, most of previous studies focus on cash dividend. The studies of stock dividend, especially high stock dividend are scarce. Secondly, most researches on stock dividend study short-term(several days before and after key event dates) market response. This paper considers more on long-term market performance. Thirdly, most of previous studies focus on cumulative abnormal return(CAR), while ignoring real turn which is more important for investors. This paper studies both CAR and real return, and set up an investment model which is later verified by most updated market data. The data of this paper comes from most recent years with more than 980 samples. From this perspective, the research result is meaningful.From the research, we can find some results. Firstly, there is some trend of China A-share market dividend policy. Generally, cash dividend is more popular while most stock dividend companies come from SME and GEM. Secondly, investors can achieve more than 6% real return and CAR by investing high stock dividend companies between dividend forecast date and record date in 2011-2013. There is an investment opportunity indeed. Thirdly, based on all samples regression result, the real return has positive correlation with stock dividend ratio, cash payout ratio and market index, while negative correlation with circulated stock value. Fourthly, compared with all samples regression result, samples from mainboard are more sensitive to stock dividend ratio and cash payout ratio. And real return of SME and GEM samples has significant correlation only with stock dividend ratio and market index. Fifthly, R2 of CAR regression result is relative low which shows that CAR of the time window has less obvious regularity. We need further investigation in future.Base on above research result, in the end of the paper, we give some opinions and suggestions to China A-share market stakeholders, especially ordinary investors.