Lintner's Model (redirected from lintner model)

Lintner's Model

A model stating that dividend policy has two parameters: (1) the target payout ratio and (2) the speed at which current dividends adjust to the target.

Notes:

In 1956 John Lintner developed this theory based on two important things that he observed about dividend policy:

1) Companies tend to set long-run target dividends-to-earnings ratios according to the amount of positive net-present-value (NPV) projects they have available.

2) Earnings increases are not always sustainable. As a result, dividend policy is not changed until managers can see that new earnings levels are sustainable.

See also: Dividend, Dividend Payout Ratio, Dividend Policy, Earnings, Earnings Estimate, Earnings Surprise, EPS, Net Present Value - NPV