The Impact of Dividend Payment Patterns and Price-to-Earnings Ratio on the Market Value of Companies Listed on the Tehran Stock Exchange

The stock price is one of the most important factors that motivates investors to buy or sell stocks. However, the presence of challenges in explaining stock price behavior due to the influence of various internal and external factors is an inevitable issue in any capital market. Among the most important fundamental analysis tools in pricing discussions are dividends and the price-to-earnings ratio. This study evaluates their informational role in the form of dividend payout patterns and lagged price-to-earnings ratio. Data from 113 profitable companies listed on the exchange over eight-years (2014-2021) were collected. In this study, a multiple linear regression model (with fixed effects panel data) was used and three variables of size, growth, and financial leverage were also controlled. The findings indicate that cash dividends, particularly dual dividends with a majority cash component, have a significant positive impact on the end-of-period stock price. However, bonus shares, whether individually or combined with cash dividends as dual dividends with a majority bonus component, do not significantly influence the end-of-period stock price. Furthermore, an increase in the lagged price-to-earnings ratio corresponds to a significant rise in the current period's stock price. These results highlight the stronger informative role of cash dividends compared to bonus shares, even in the case of dual dividends where a stronger price reaction to the cash majority is observed. Additionally, the study confirms the informational content of the price-to-earnings ratio and provides evidence for its predictive power in forecasting changes in stock price in subsequent periods. Overall, this research contributes to the understanding of stock price behavior in the Tehran Stock Exchange and highlights the importance of considering dividend payout patterns and the price-to-earnings ratio in investment decision-making.