Accidental High Yielder - Explained
What is an Accidental High-Yielder Stock?
Written by Jason Gordon
Updated at August 3rd, 2021
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Table of Contents
What is an Accidental High Yielder?What qualifies as an Accidental High Yielder?Accidental High Yielder and Dividend YieldsAcademics Research on Accidental High YielderWhat is an Accidental High Yielder?
An accidental high yielder is a stock that yields a usual but high dividend for a company. The yield for this stock outweighs the normal yield of stocks, it is not what the company expects, it is therefore an accidental high yielder. A stock can be referred to as an accidental high yielder if the dividends a company earns from the stock is an abnormally high dividend or an unusual yield.
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What qualifies as an Accidental High Yielder?
A stock that has a dividend yield greater than what the yield of a benchmark average should be is an accidental high yielder. In this case, the dividend yield of the stock increases while the actual dividend payout remained unchanged. An accidental high yielder is a common trait in the bear market, this is because when stock prices fall, the dividend yield of the stock increases and exceeds that of the market benchmark. A company is said to have an accidental high yielder when the dividend yield of a stock increases and pays an unintended excessive dividend yield to investors despite that the price of the stock fell.
Accidental High Yielder and Dividend Yields
Investors of a company are entitled to the earnings of the company which are distributed as dividend yields. This does not necessarily mean cash payment, it may be shares or stocks owned by the company. Usually, dividends are paid at set times, it can be quarterly, monthly or at an agreed schedule. The dividend yield of a company is important to investors as it helps them decide whether to invest in a company or not. An accidental high yielder is however a stock owned by a company or an investor that yields abnormally high dividends. The dividend yield is often unexpected and higher than the normal dividend yield.
Academics Research on Accidental High Yielder
- The value and performance of US corporations, Hall, B. H., Hall, R. E., Heaton, J., & Mankiw, N. G. (1993). The value and performance of US corporations. Brookings Papers on Economic Activity, 1993(1), 1-49.
- Disentangling equity return regularities: New insights and investment opportunities, Jacobs, B. I., & Levy, K. N. (1988). Disentangling equity return regularities: New insights and investment opportunities. Financial Analysts Journal, 44(3), 18-43.
- What do firms do when dividend tax rates change? An examination of alternative payout responses, Hanlon, M., & Hoopes, J. L. (2014). What do firms do when dividend tax rates change? An examination of alternative payout responses. Journal of Financial Economics, 114(1), 105-124. This paper investigates whether investor-level taxes affect corporate payout policy decisions. We predict and find a surge of special dividends in the final months of 2010 and 2012, immediately before individual-level dividend tax rates were expected to increase. We also find evidence that immediately before the expected tax increases, firms altered the timing of their regular dividend payments by shifting what would normally be January regular dividend payments into the preceding December. To our knowledge this is the first evidence in the literature about changes in the timing of regular dividend payments in response to tax law changes. For both actions (specials and shifting), we find that it was more likely for a firm to respond to individual-level tax rates if insiders owned a relatively large amount of the firm. Overall, our paper provides evidence that managers consider individual-level taxes in making corporate payout decisions.
- Estimation and uses of the term structure of interest rates, Carleton, W. T., & Cooper, I. A. (1976). Estimation and uses of the term structure of interest rates. The Journal of Finance, 31(4), 1067-1083.
- Price cap regulation, profitability and returns to investors in the UK regulated industries, Parker, D. (1997). Price cap regulation, profitability and returns to investors in the UK regulated industries. Utilities Policy, 6(4), 303-315. The privatisation of the public utilities in the UK led to the creation of a regulatory structure based on dedicated regulatory offices operating price cap controls. Ideally, the price cap operates so as to share efficiency gains equitably between share-holders, in terms of higher profits, and consumers, in terms of lower prices. The question is, have gains been shared equitably so far? This paper attempts to shed light on this issue by reviewing the profits of BT, British Gas, the water and sewerage companies of England and Wales and the regional electricity companies (RECs). The paper also discusses returns to shareholders in terms of an internal rate of return on investment.
