Do Dividends Still Signal? Time-Varying Informational Content of Dividend Changes in the Post-2000 Period

Abstract

This thesis examines whether dividend changes predict future cash flow volatility and whether the informational content of dividend signals varies over time. Prior research relies on pooled estimates that implicitly assume a stable relationship. Using quarterly data on U.S. firms from 2000 to 2025, this thesis allows the relation to vary across periods. The results show that the informational content of dividend increases is time-varying: in the post-period, increases are associated with lower future cash flow volatility, consistent with signaling theory, while the relationship is reversed in the pre-period. Dividend decreases and omissions are positively associated with future volatility across the full sample period, whereas initiations show no significant effect. These findings suggest an asymmetry between positive and negative dividend signals and indicate that pooled estimates may obscure important variation over time.