Definition
The term dividend clientele refers to shareholders that have a common preference for the dividend policy of a company. Dividend clientele will oftentimes pressure companies into dividend policies that are aligned with their investment objective.
Explanation
The dividend clientele of a company are holders of common stock that share a similar viewpoint on the company's dividend policy. This viewpoint will normally be self-serving, and be directly aligned with the shareholder's investment objective. For example, shareholders that depend on a generous dividend yield will pressure the company to continually maintain, or increase, the company's quarterly dividend.
The pressure a company's dividend clientele can place on their decision-making process is not trivial. In fact, a change in policy that is not aligned with the views of a company's clientele can precipitate what is referred to as the clientele effect. The clientele effect is an investment theory that hypothesizes the investors in a security will have a direct impact on the price of the security when a change in policy affects their investment objective. These individuals will buy or sell the security if a change in policy takes place that is aligned, or no longer aligns, with the individual's investment objective.
Related Terms
The term conservative investing refers to a strategy that attempts to preserve the value of a portfolio by investing in low risk securities. A conservative investment portfolio would include blue chip stocks as well as fixed income securities.
Moneyzine EditorJanuary 11th, 2024- The term preservation of capital refers to a strategy that attempts to prevent a loss of funds in a portfolio. Preservation of capital is important to investors that are not willing to risk a loss, even in the near term.Moneyzine EditorSeptember 21st, 2023
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The term 100% equities strategy refers to the creation of an investment portfolio that consists solely of common stock. A 100% equities portfolio can be assembled by an investor, or take the form of a pooled account such as a mutual fund.Moneyzine EditorJanuary 5th, 2024
The term capital growth strategy refers to the creation of an investment portfolio that seeks to maximize value in the long term. A capital growth portfolio will allocate more than half of the fund's assets to equities.Moneyzine EditorJanuary 10th, 2024
The term clientele effect refers to a theory that states the price of a security is affected by certain shareholders if a company or fund changes its policies. The clientele effect assumes investors are attracted to certain securities because of their past practices.Moneyzine EditorJanuary 11th, 2024
