Does Profitability Moderate the Relationship Between the Leverage and Dividend Policy of Manufacturing Firms in Nigeria and South Africa?

Abstract

This study examines the moderating role of profitability in the relationship between leverage and dividend policy in listed manufacturing firms in Nigeria and South Africa. Using a sample of 915 firm-year observations from 2013 to 2022, the analysis employs panel Tobit regression to manage the censored nature of dividend data, with logistic regression applied as a robustness check. The findings reveal a negative association between leverage and dividend payout ratio for Nigerian firms, while this association is less pronounced and statistically insignificant in South Africa, reflecting a more flexible financial environment. Profitability strengthens the leverage–dividend policy relationship in Nigeria, enabling firms to maintain dividends despite high leverage; however, this moderating effect is weaker in South Africa. These results underscore the importance of context-specific financial strategies, recommending that Nigerian policymakers improve access to affordable credit, while South African policymakers focus on sustaining market stability. This study advances the understanding of dividend policy in emerging markets by clarifying how leverage and profitability interact to shape dividend practices.