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Dividend pricing/present value models relate current stock prices to expectations of future dividends. In this study we apply the West and Campbell–Shiller tests of the dividend pricing relation to an index of real estate investment trusts (REITs). REITs provide a unique test of these models since, during our study period, REITs were mandated to pay out at least 95% of taxable income as dividends. While our results complement previous research which finds that the dividend pricing model cannot be rejected if share repurchase is included as part of dividends, our data contain a much less significant amount of share repurchase, so that our approach to the issue of the viability of dividend pricing models offers an alternative insight. Our research suggests that, for our REIT population, dividend pricing models cannot be rejected.


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© Wiley. Final version published as: Kallberg, J. G., Liu, C. H., & Srinivasan, A. (2003). Dividend pricing models and REITs. Real Estate Economics, 31(3), 435-450. Reprinted with permission. All rights reserved.