Some recent empirical evidence suggests that stock prices are not properly modelled as the
present discounted value of expected dividends and that empirical models incorporating nonlinear
bubble components better fit the data. In this paper we show that the nonlinearity in the
relationship between prices and dividends may arise from how managers choose dividend payout.
In particular, we propose a model of managed dividends which can explain observed long-term
trends in stock prices. This model of managed dividends is shown to be observationally
equivalent to the popular intrinsic bubbles model.