| Dividend Change | Median 12 month price return before announcement | Median 3 month price return after announcement | Median Adjusted Dividend Payout Ratio before announcement | Median Dividend Yield before announcement | Percent with negative EPS before announcement |
|---|---|---|---|---|---|
| Big Cut | -14% | -15% | 100% | 4% | 25% |
| Small Cut | 0% | -1% | 91% | 6% | 11% |
| Stay the Same | 10% | 2% | 44% | 2% | 10% |
| Small Raise | 12% | 4% | 45% | 2% | 4% |
| Big Raise | 20% | 5% | 23% | 1% | 9% |
Schwab Center for Financial Research. Past performance is no guarantee of future results.
Note: This table groups dividend paying stocks from the Russell 1000 Index into buckets based on the change in their dividend. Stocks were monitored from 2010 to 2020. Stocks with a dividend cut of 20% or more were grouped into the bucket labeled "Big Cut.” Stocks with a big cut in their dividend had a median stock price decline of 14% before the announcement of the cut and the stock price continued to fall by a median of 15% in the quarter after the announcement. These companies had a median adjusted dividend payout ratio of 100%. When earnings are negative, the dividend payout ratio loses meaning, so it was adjusted to be 100% for those stocks with negative earnings. In contrast, stocks that raised their dividend by 20% or more (grouped into the bucket "Big Raise") had a median price return of 20% in the year before the announcement, continued to appreciate after the announcement, and had a dividend payout ratio of just 23%. Compared to stocks that raised their dividend, stocks that cut their dividend had higher dividend yields and were more likely to have negative earnings.