6-11 The dividend decision Lintner 's“ Stylized facts” CHow Dividends are Determined) 1. Firms have longer term target dividend payout ratios 2. Managers focus more on dividend changes than on absolute levels 3. Dividends changes follow shifts in long-run, sustainable levels of earnings rather than short-run changes in earnings 4. Managers are reluctant to make dividend changes that might have to be reversed Irwin/McGraw-Hill CThe McGraw-Hill Companies, Inc, 2001©The McGraw-Hill Companies, Inc.,2001 16- 11 Irwin/McGraw-Hill The Dividend Decision 1. Firms have longer term target dividend payout ratios. 2. Managers focus more on dividend changes than on absolute levels. 3. Dividends changes follow shifts in long-run, sustainable levels of earnings rather than short-run changes in earnings. 4. Managers are reluctant to make dividend changes that might have to be reversed. Lintner’s “Stylized Facts” (How Dividends are Determined)