Authors: Tobin Hanspal (Goethe University), Konstantin Bräuer (Goethe University) and Andreas Hackethal (Goethe University)
Title: Consuming Dividends
Abstract: This paper studies why investors buy dividend-paying assets and how they time their consumption accordingly to anticipated income. We combine administrative data on bank customers linking detailed portfolio and trading data, categorized consumption transactions and income, and survey responses on financial behavior. Investors in our sample are excessively sensitive and increase consumption around dividend receipt, inconsistent with consumption smoothing. We find that the observed response is driven by financially sophisticated investors who select dividend portfolios, anticipate dividend income, and plan consumption accordingly. Our results contribute to the literature on a dividend clientele and provide evidence of 'planned' excess sensitivity.