Summary: A stock can be viewed as a collection of dividend strips, each representing a claim to a single dividend. I study how individual dividends are priced across the cross-section of U.S. stocks. I construct and estimate the prices of synthetic dividend strips with 1-year and 2-year maturities using equity options. I document that cross-sectional variations in short-term dividend prices are substantial and driven predominantly by differences in discount rates. Short-term dividend strips with lower price-dividend ratios deliver higher average returns than those with higher price-dividend ratios. Moreover, the cross-sectional variations in maturity-specific discount rates appear to decline with maturity, at least at the short end. Finally, I interpret these cross-sectional variations in discount rates using asset pricing theory. I evaluate three leading cross-sectional asset pricing models and find that the model by Kogan and Papanikolaou (2013) aligns most closely with my findings.

Presented at: INSEAD (2024), The 13th Wharton-INSEAD Doctoral Consortium (2024), NYU Shanghai (2025), University of Minnesota Twin Cities (2025), University of Texas at Dallas (2025), University of Toronto (2025), University of Hong Kong (2025), City University of Hong Kong (2025), Chinese University of Hong Kong (2025), McGill University (2025)