We investigate the relation between dividend changes and future profitability, measured in terms of either future earnings or future abnormal earnings. Supporting "the information content of dividends hypothesis," we find that dividend changes provide information about the level of profitability in subsequent years, incremental to market and accounting data. We also document that dividend changes are positively related to earnings changes in each of the two years after the dividend change.
Nissim, Doron, and Amir Ziv. "Dividend Changes and Future Profitability." Journal of Finance 56, no. 6 (December 2001): 2111-34.
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