Abstract
Investors’ curiosity on the worth of their investment could be resolved with the availability of sufficient information in predicting their returns and security. Several studies linked dividend payout to the performance of manufacturing firms in Nigeria but a few considered information as a signal to performance not necessarily to dividend. This paper examined the usefulness of accounting information in predicting the investors return especially dividend payout. Ex-post facto design was adopted using secondary data obtained from annual reports and accounts of 36 selected manufacturing firms for a period of 20 years (1997-2016). The results of the regression (fixed effects) analysis carried out revealed that lagged dividend, leverage and sales growth have significant positive effect on dividend payout while earnings per share, operating cash-flow and firm size influences dividend payout ratio negatively with the exemption of asset utilization ratio with insignificant effect. It is evident that accounting information is useful to investors’ in predicting the returns on their investment and dividend payout. Investors should look beyond past dividend in forecasting expected returns but several factors as presented in the financial statements in taking informed investment decisions. Key words: Accounting information, lagged dividend, asset utilization, returns prediction, investment.
Highlights
The two key fundamental qualities of good accounting information are to be relevant and faithfully presented
Understanding the dividend pattern of a firm is very important to the investors, this paper sought to examine the influence of accounting information in predicting the dividend payout ratio of selected manufacturing firms in Nigeria
The coefficient of determination measured by adjusted R2 of 40.4% reflect the combined influence of earnings, past dividend, asset utilization ratio, leverage, size, sales growth and operating cash flow on dividend payout ratio. This implies that 40.4% variation in dividend payout ratio of Nigerian listed manufacturing firms is explained by the accounting information
Summary
The two key fundamental qualities of good accounting information are to be relevant and faithfully presented. The studies of Brahmaiah (2018), Pandey and Ashvini (2016), and Sindhu et al (2018) revealed that leverage significantly influence firm’s ability to pay dividend positively while Lestari (2018), Gangil and Nathani (2018), and Yong and Mazlina (2016) obtained an insignificant positive relationship between leverage and dividend payout. On the contrary, Musa (2009), Nishant and Ramesh (2015), Rihanat et al (2016), and Wasike and Ambrose (2015) concluded that cash-flow and dividend payout are directly and significantly related while Yusniliyana and Suhaiza (2016) and Al-Najjar and Kilincarslan (2018), and Echchabi and Azouzi (2016) reported an insignificant positive relationship between cash-flow and dividend decision
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