Practical Applications of The Stock as a Portfolio of Durations: Solving Black’s Dividend Puzzle Using Black’s Criteria

Should a firm should pay dividends and does paying them—or not—have any relevance to its stock value? In an interview with Institutional Investor Journals , Oscar Varela explains how dividend policy impacts a stock’s riskiness when its duration is taken into consideration. His research was inspired by conflicting statements by Fischer Black , first in a 1976 article and later in a 1995 book. Varela explains, “It struck me that the same Black who claimed dividends to be puzzling had nevertheless, in his book on general equilibrium, downgraded the idea of puzzles.”