Dividend Pay-Out Policy and Company Financial Performance in Kenya

Ogachi Daniel ,Ndege Richard ,Gaturu Peter ,Zoltán Zéman

doi:10.7176/rjfa/10-10-24

Abstract

This research is financed by the Stipendium Hungaricum Scholarship Programme Abstract Dividend Payout has been a pertinent issue for both organisations and investors. Most investors prefer to invest or retain their investments in companies which declare dividends regardless of their cash flows. Companies, therefore, strive to maintain dividend payment to send positive shockwaves to investors to promote investor confidence. The objective of this study was, therefore, to ratify whether dividend payout is significant in making investment decisions. The study further sought to establish the implication dividend payment has on the financial performance of listed companies in the energy and petroleum sector in Kenya. The study used Secondary data from all the five listed companies in the energy and petroleum sector for the period 2007-2017. A descriptive design was deemed appropriate for the research. The dividend payout ratio was used as the independent variable of the study while Return on Equity and Return on Assets were the dependent variables of this study. Multiple regression analysis was used to determine relationships between the predictor and the dependent variable. Keyword: Bankruptcy Prediction, Dividend Pay-out Ratio, Financial Performance, Ratio Analysis DOI : 10.7176/RJFA/10-10-24 Publication date :May 31 st 2019

Highlights

The core goal of firms is to maximise the returns of investors through growing the value of shares of savings
Correlations Correlations were used to establish if there was any linear relationship between the predictor variables and the dependent
Dividend payout ratio had a negative association with ROE (r=-0.412, p-value 0.07) and lastly, the results revealed a positive relationship between Leverage and ROE (r=0.241, p-value 0.128)

Summary

Introduction

The core goal of firms is to maximise the returns of investors through growing the value of shares of savings. Payment of dividends by companies is the motivation behind all firms, and they do so using two different ways; the first one being that companies pay either cash dividends to their shareholders or capital gains and secondly by retaining the bonuses and reinvesting the money on other income generating activities (Hamid, Khurram, & Ghaffar, 2017). In his theory on dividend payment, Gordon supports dividend payment to shareholders is one way of increasing the net worth of the firm (Press & Review, 2010). The competitors will be interested in the dividend policy so that they can remain relevant in the business environment

Objectives

Methods

Conclusion