The impact of dividend policy on the stock return volatility (a study of financial firms listed on the s&p 500)

The volatility of share prices has demonstrated distinct trends in several worldwide exchange markets, such as the S&P 500 in the United States of America. There have been several attempts to identify potential causes of this volatility and strategies for mitigating it, but few studies have been conducted in this area, particularly in developing nations. Thus, the purpose of this study is to investigate how dividend policies affect the volatility of financial firms' stock returns that are listed on the S&P 500. Panel least squares regression was used in the study to investigate how dividend policies affect market value and the volatility of stock returns in financial companies that are listed on the S&P 500. A thorough assessment of the implications of dividend policy is provided by the dependent variables that were selected: price volatility, market value, and price. The study examined a sample of sixteen USA financial companies. In order to accomplish the study's goal, a random selection of the study period (2015–2022) was made for the panel data. The study discovered a weak negative association (-0.092) between PVOL and dividend per share (DPS), which suggests that as dividend payments per share rise, stock price volatility will somewhat decrease. Furthermore, there is evidence that lower stock price volatility is linked to greater dividend yields, as PVOL shows negative correlations with both dividend yield in the present period (DYtx) (-0.349) and dividend yield in the preceding period (DYtx-1) (-0.349). The study revealed that larger financial organizations would see slightly less volatility in stock prices based on the negative correlation (-0.053) between PVOL and firm size (FIRMSIZE). It has been concluded that there is a negative relationship between dividend yield and stock return volatility. The study also concludes that a higher proportion of earnings distributed as dividends may be linked to lower market values. It is suggested, in accordance with the findings that investors should choose companies with a stable payout ratio and that corporations ought to give priority to paying out. This will serve as an investment decision for stakeholders.