John Lintner found that management aimed to have a stable payout ratio target but, in fact, it is often the dividend itself that is kept stable and that reverting a dividend hike in the future would be avoided even when a current year's profit would warrant it.
To me, this seems to indicate that management carefully selects a dividend that they think can be maintained or steadily grown in the foreseeable future so the investor could see it as an insider's vantage point for the actual prospects of the company, more so than the typically more volatile net income.
However when I see a chart like this (I'm going to assume it is a reliable source) that it is anything but steady, it would appear, superficially, that management as a whole, has not been doing a stellar job at forecasting.
On the other hand, I have found that there are a number of reasons that explain changes in dividends in the market as a whole: changes in dividend taxation vs capital gains taxation for individual investors, a cultural shift with new companies entering the index that have a different view on returning value to the investor and a greater predilection for stock buybacks.
More specifically, my question arised when I considered an index investor looking at different valuation parameters, if it should be reasonable to see the weighted average of the dividend and buyback yield of the index as a reliable and conservative part of the return they could expect in the long term as it has been estimated, to the best of their abilities, by managerial teams who have a unique insight into their companies or rather, in reality, do they typically shrink and grow with short or medium term profit levels?
I hesitated to include a reference to index investing in the title, as it would make it more confusing.