FYI: It’s been well-documented that stock prices tend to react positively when companies announce an increase in dividends. That’s in contrast to economic theory, which holds that companies should distribute earnings to investors when they cannot earn a rate of return in excess of their cost of capital; otherwise, they should reinvest in their business.
The explanation for the positive reaction to such corporate announcements is that managers are signaling good news about the future prospects for the company—the firm is becoming more mature and less risky, enabling it to take on more leverage or hold less cash reserves.
Regards,
Ted
http://www.etf.com/sections/index-investor-corner/swedroe-dividend-policy-stock-returns
