Gordon Growth Compound Annealing Dividend Forecasting
Year: 2026
Type: preprint
Abstract: When a company pays a dividend, its share price drops on the ex-dividend morning to reflect the cash leaving the business. While textbook theory looks only at that single day, portfolio managers trade across the entire week and need to know whether a stock will recover or keep falling. We study 23,105 S&P 500 dividend events from 2006 to 2026 using only data available at the close before the ex-dividend date. First, we test whether a firm’s dividend growth is sustainable by compounding it over its price-to-earnings payback period and comparing the result to the Treasury bill rate. Second, we track how many other S&P 500 firms pay dividends in the same five-day window, using their combined market value to measure market-wide cash movement. A tree-based model predicts weekly price direction with 58.79% out-of-sample accuracy and widens the spread between the top and bottom deciles by 17.9 percentage points compared with sorting on dividend yield alone.
Author: Dicks, Rollo
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W7222222434
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