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Do Dividend Clienteles Exist? Evidence on Dividend Preferences of Retail Investors




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    • John Graham is at the Fuqua School of Business, Duke University. Alok Kumar is at the Mendoza College of Business, University of Notre Dame. We would like to thank two anonymous referees, Ben Ayers, Brad Barber, Robert Battalio, Jennifer Blouin, Michael Brandt, Alon Brav, William Goetzmann, Yaniv Grinstein, Hans Heidle, Mike Hemler, Dong Hong, Sonya Lim, Bill McDonald, Bob McDonald, Roni Michaely, Michael Roberts, Paul Schultz, Mark Seasholes, Jim Seida, Hersh Shefrin, Rob Stambaugh (the editor), Meir Statman, Stijn van Nierwerburgh, and seminar participants at Duke University, New York University, University of Minnesota, University of Notre Dame, University of Texas at Austin, and the 2004 UNC Tax Symposium for helpful discussions and valuable comments. We thank Itamar Simonson for making the investor data available to us and Terrance Odean for answering numerous questions about the database. All remaining errors and omissions are our own.


We study stock holdings and trading behavior of more than 60,000 households and find evidence consistent with dividend clienteles. Retail investor stock holdings indicate a preference for dividend yield that increases with age and decreases with income, consistent with age and tax clienteles, respectively. Trading patterns reinforce this evidence: Older, low-income investors disproportionally purchase stocks before the ex-dividend day. Furthermore, among small stocks, the ex-day price drop decreases with age and increases with income, consistent with clientele effects. Finally, consistent with the behavioral “attention” hypothesis, we document that older and low-income investors purchase stocks following dividend announcements.