Keeley Teton Advisors

This edition of the Keeley Teton Dividend Tracker includes our usual semiannual update and an analysis of the performance of spinoffs that pay dividends. The second half of 2023 produced mixed results in the dividend universe. With the IPO market frozen, M&A volumes subdued, and the mid-year Russell rebalancing complete, the universe saw little change in composition. The percentage of companies raising their dividends was about the same as in the first half, but the magnitude was a little smaller. The number of companies cutting ticked up a little. Relative stock price performance varied across capitalization ranges. Strength in the Magnificent Seven and their similar companies led dividend payers to lag in large caps, but a rebound in shares of banks helped small cap dividend payers to outperform.

Our feature this time combines two of our favorite investment themes: Dividends and Spinoffs. Spinoffs have a record of outperforming the market and we find that spinoffs that pay dividends perform even better.


The Dividend Universe


We did not see much change in the universe of dividend-paying stocks in the second half of the year. The Russell reconstitution creates activity in the first half, but the second half is usually more stable. IPOs, acquisitions, spinoffs, and initiations usually drive the activity.

  • The number of dividend payers declined slightly in the Russell 2000 but grew a little in the Midcap and Top 200. The percentage of companies paying dividends was consistent across the capitalization spectrum and similar to six months ago by style.
  • The weighting of dividend payers within the benchmarks crept up a little, particularly in the value sub-benchmarks.
  • Acquisitions shrank the number of dividend payers in the Russell 2000. Also, a few companies paid special dividends or spun off businesses in the first half of the year, but did not do so in the second.
  • The number of large cap dividend payers increased. This was mostly due to spinoffs as newly divested Kenvue (from Johnson & Johnson), Veralto (from Danaher), and GE Healthcare (from General Electric) all initiated dividends. Also, long-time dividend payer Walt Disney Company resumed payouts after suspending them during the Covid pandemic.

Dividend Changes


Because companies usually raise their dividend the same time every year, we look at the year-over-year change in the indicated dividend.

  • The column titled “Avg. Increase” presents the average increase of the companies raising their dividends over the last year. Outliers have a significant impact on the numbers. If we look at the median increase for those that increased their dividend, it is about 8% in each index. If we look at the median increase for all dividend payers, it was flat for the Russell 2000, up 5% for the Russell MidCap index, and up 7% for the Russell Top 200.
  • The percentage of companies raising their dividends has come down from a year ago. It was fairly stable for mid and large caps but continues to fall for small caps. It is actually closer to the levels it fell to during the pandemic than it is to the prepandemic percentages.
  • It is worth noting that 70% of the companies in the Keeley Small Cap Dividend Value Fund and 75% of the companies in the Keeley Mid Cap Dividend Value Fund have initiated a dividend or raised it over the last year.
  • Cuts and omissions ticked up for small and mid-caps. They are now at pre-pandemic levels.
  • The percentage of companies paying dividends increased slightly in the Russell Top 200 but did not move in the Russell Midcap and Russell 2000 Indexes.

Yields and Returns


The table above presents the simple average of the yield on the dividend-paying stocks within each index. The yield on the index is lower because not all stocks pay dividends.

  • The gain in stock prices drove yields lower.
  • Relative performance was mixed, but relatively good for dividend payers. Within the Russell 2000, dividend-payers outperformed across the board. Strong gains in regional bank and real estate stocks contributed to the outperformance. Non-dividend payers, however, carried the day for large cap stocks. Midcap dividend payers saw mixed relative performance. They outperformed in Value but lagged slightly in Growth.

Feature: What Happens When Our Worlds Collide?

In addition to our expertise in dividend-paying stocks, our predecessor firm Keeley Asset Management long invested in stocks of companies undergoing substantial corporate change. These are companies where we expect the future to diverge markedly from the past. While investors can imagine a lot of different conditions that might create this, we look at specific types of transactions such as emergence from bankruptcy, the appointment of a new CEO to an underperforming company, or the demutualization of a financial institution. Most prominent among these types of transactions has been spinoffs.

Spinoffs happen when a company decides to create a new public entity from one or more of its operating divisions and distribute those shares to its existing shareholders. Many reasons exist why a company might want to do this. In some cases, the public markets might value the spinoff more favorably than the existing company. Conversely, the division being spun off might be viewed as a drag on the growth rate of the parent company. Other times, the needs of the parent and spinoff have diverged to the point where separation benefits both entities. Finally, at times, the spinoff simply unwinds a merger that seemed like a promising idea at a different time and under a different management team.

Regardless of the motives, the newly independent company often benefits from the separation. First, its leaders are entirely focused on one business and have incentive plans that reward success in the business. Second, the SpinCo can often pursue different capital allocation strategies rather than upstreaming cash flow to the parent. Furthermore, its status as an independent “pure play” public company provides it with a currency that may be more attractive to acquisition candidates.

From a stock price performance standpoint, spinoffs are usually smaller companies than the parent and may not fit within the investment mandates of the investors that own the parent companies. This can lead to structural selling initially and can provide an attractive entry point.

These factors have all likely contributed to strong outperformance by spinoff stocks. We wondered how the performance of spinoffs that pay dividends would compare with the overall market and the performance of all spinoffs. We looked at the performance and here is what we found.

Spinoffs Outperformed Over Time…

The outperformance of spinoffs has been documented in a good deal of academic research over the years. Papers published in 1993, 2009, 2015, and 2022 all show how the performance of spinoffs has exceeded that of the market. Our own research confirms this.

Using spinoff lists compiled by Spin-Off Research and The Edge Group and data from FactSet Research Systems, we looked at the performance of 756 US spinoffs beginning in 1993. We compared the performance of the stocks from the day they were spun off to that of their comparable Russell size index over 90 days, 180 days, one year, and two years. The results of this analysis are presented in the table below.


  • In each time period, spinoffs outperform on average.
  • Only about half of the spinoffs in the sample outperformed. The better relative performance resulted from the winners being much better than the losers were bad.
  • Finally, we found it curious that the relative performance over one year was better than the relative performance over two years. Much of this can be attributed to some outliers, especially a few spinoffs from 1999. For example, Tibco Software (carved out of Reuters in July 1999) appreciated more than ten times in the first year after its IPO.

…And Those That Pay Dividends Did Even Better

When we analyzed the relative performance of dividend-paying spinoffs, we looked at the stocks in the spinoff universe that paid dividends in the first quarter after they started trading as an independent company. We were a little surprised that dividend-payers accounted for nearly a third of spinoffs. We were encouraged by the performance track record.


  • Like the overall spinoff universe, dividend paying spinoffs have generated positive relative performance across all four time periods.
  • They have outperformed the overall spinoff universe in the 90 Day, 180 Day, and Two Year timeframes, but lagged in the One Year average, probably because of the outliers we noted above.
  • When comparing the success rate between the dividend payers and the overall spinoff universe, we see that spinoffs are more likely to generate positive relative returns and that superiority is about 6% in each time period.
  • Not surprisingly, the average relative performance for dividend payers comes in a tighter band than for All Spins. The average relative performance for the outperformers is less, but the drawdown for the laggards is smaller as well.


We have long liked investing in stocks of companies that pay dividends and have a long legacy of investing in spinoff companies. The payment of a dividend implies a level of consistency and stability. The creation of a spinoff suggests a reinvention with wide-open possibilities. It would seem like the two would be at odds with each other. Maybe not. Reinventing a company with a foundation that allows it to pursue those wide-open possibilities seems like a good place to start. The past performance of the spinoffs that decided to pay dividends supports this view.