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Dividend Forecasting
Does anyone have algorithms, papers, etc on Dividend Forecasting? I want to know how companies such as MarkIT (http://www.markit.com/information/produ ... sting.html) does their forecasting...Thanks,Ram
Dividend Forecasting
i dont think markit do any forecasting. you can imply dividends for prices of options and forwards or get them from equity analysts
knowledge comes, wisdom lingers
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- KackToodles
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Dividend Forecasting
dividends are voted on by the board; they are discretionary so can't be forecasted. you have to read the tea leaves but the past is no guarantee of the future.
Dividend Forecasting
You could research how closely dividend increases correlate to increases in earnings growth over longer time frames.
Dividend Forecasting
QuoteOriginally posted by: daveangeli dont think markit do any forecasting. u r quite wrong on this one.
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- KackToodles
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Dividend Forecasting
QuoteOriginally posted by: nazzdackYou could research how closely dividend increases correlate to increases in earnings growth over longer time frames. they correlated almost 100% over 10+ year time frame, except for wildly profitable net stocks that don't pay any dividends.
Dividend Forecasting
Usual method is to look at historic dividend average / trader in some places can mark to that if they beleive that the dividend is going to be wildly different (i.e. certain German German Chemical companies last year).
Dividend Forecasting
I know that dividends are voted by the board, but in order to do any modeling of equity derivatives (especially dividend paying stocks), the dividend yield and any future projected dividends needs to be computed. Historic dividends are the way I was planning on doing it, but wanted to know if there was any better way...Nazzdack has an interesting method but analyzing the time series of dividends to earnings for a particular company. I'll look into that as well...Thanks,Ram
Dividend Forecasting
i apologise as it seems that markit do actually forecast dividends. to be honest if i was doign this i would look at implied divs in the market. first, this can be done from prices of options. also, there is an active market in dividend swaps.
knowledge comes, wisdom lingers
Dividend Forecasting
What's wrong with applying historical payout percentages to earnings estimates? If the dividend is stable, and not determined by payout ratios, your task is obviously much easier. The growth rate of dividends is typically found by multipling ROE by Retention Rate.
Last edited by bilbo1408 on May 18th, 2008, 10:00 pm, edited 1 time in total.
Dividend Forecasting
QuoteOriginally posted by: daveangeli would look at implied divs in the market. first, this can be done from prices of options. also, there is an active market in dividend swaps.forgot the implied divs on the options -that is used too, although with less degree of success I believe.Only seen divi swaps traded in particular cases with very low volume didn't know you could mark to them...
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- KackToodles
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Dividend Forecasting
QuoteOriginally posted by: bilbo1408What's wrong with applying historical payout percentages to earnings estimates? If the dividend is stable, and not determined by payout ratios, your task is obviously much easier. The growth rate of dividends is typically found by multipling ROE by Retention Rate. if you're going to do this, why bother at all? just assume dividends are proportional to price itself. save yourself the horrrendous work of going through the long but inaccurate exercise in futility.
Dividend Forecasting
Exactly my point. I don't think any algorithm will help here, but rather just some basics pertaining to analyst's earnings estimates.
Dividend Forecasting
Companies don't like to cut "regular" dividends, so they are sticky downward, and changes in dividends will be negatively skewed, because when business is bad, a company may eliminate its dividend altogether. Companies declare "special" dividends when they want to tell the market that a dividend is one-time rather than sustainable.Dividend swaps are traded by Barclays and I assume other banks, and Barclays dividend swap indices are available on Bloomberg I believe.
Dividend Forecasting
QuoteOriginally posted by: gelfandCompanies don't like to cut "regular" dividends, so they are sticky downwardactually, for the same reason, they don't like to increase dividends either, because if next period they cant pay the same dividend, then the stock price goes down.