Dividend stability

Lintner (1956, p. 104)

Among the more important factors which had more or less consciously and rationally entered into these standards were: the growth prospects of the industry and, more importantly, the growth and earnings prospects of the particular company; the average
cyclical movement of investment opportunities, working capital requirements, and internal fund flows, judged by past experience; the relative importance attached by management to longer term capital gains as compared with current dividend income for its stockholders, and management's views of its stockholders' preference between reasonably stable or fluctuating dividend rates, and its judgment of the size and importance of any premium the market might put on stability or stable growth in the dividend rate as such; the normal pay-outs and speeds of adjustment of competitive companies or those whose securities were close substitutes investrnentwise; the financial strength of the company, its access to the capital market on favorable terms, and company policies with respect to the use of outside debt and new equity issue; and management's confidence in the soundness of earnings figures as reported by its accounting department, and its confidence in its budgets and projections of future sales, profits, and so on.

DeAngelo, DeAngelo, and Skinner (2004)