Juicing the Dividend Yield: Mutual Funds and the Demand for Dividends

Samuel Hartzmark

Research

49 Pages

This paper presents evidence consistent with a subset of mutual funds engaging in significant trading to artificially increase their dividend yields, by buying stocks shortly before ex-dividend dates and selling them afterwards.

Key Takeaways

Dividend Payouts: Funds paid more than twice the dividends implied by their holdings in 7.4% of fund-years examined.
Inflows: Juicing is associated with larger inflows, and is more common among funds with unsophisticated investors.
Cost to Investors: Juicing is costly to investors through higher turnover and increased taxes of 0.57% to 1.52% of fund assets per year.
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