Abstract
This study investigated the information content theory of dividends in the Kenyan Stock market. Data was obtained from the Nairobi Stock Exchange (NSE) hand book for the period 2001–2007. Using regression analysis, the study attempted to determine the factors that influence dividend payments in the subject companies. The results of this study indicate that dividend payments are mainly influenced by the current year’s income followed by the company’s retained earnings. The study also found a significant relationship between the share prices of the companies and the dividends paid. We conclude that whereas profitability drive share prices, dividends also influence the share prices of the companies listed on the NSE. Therefore managers may use dividends to convey information. However the study found no significant relationship between dividend payment and liquidity.
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