What is 'Lintner's Model'
BREAKING DOWN 'Lintner's Model'
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.