Evaluation of the Effect of Financial Performance on Dividend Payout of Deposit Money Banks in Nigeria

Abstract

This study evaluates the effects of financial performance measures on the dividend payout of deposit money banks in Nigeria The specific objectives are to determine the effect of earnings per share on dividend per share of deposit money banks in Nigeria, to examine the effect of return on assets on the dividend per share of deposit money banks in Nigeria, to assess the effect of return on equity on dividend per share of deposit money banks in Nigeria and to evaluate the effect of profit for the year on dividend per share of deposit money bank in Nigeria from 2011 to 2020. The proxies for the independent variables, Financial performance, are earnings per share, return on assets, return on equity and profit for the year while the proxy for dividend payout is dividend per. The study adopted ex post factor research design. Secondary data were obtained from the annual audited reports of the banks from 2011 to 2020. Correlation coefficient was used to determine the strength of association among the variables while multiple regression analysis was used to analyze the data obtained. The finding of the study revealed that earnings per share and return on assets had significant positive effects on dividend per share; return on equity had insignificant positive effect on dividend per share while profit for the year had significant negative effect on dividend per share of deposit money banks in Nigeria. The researcher concluded that financial performance measures had significant positive effect on dividend per share except for profit for the year that had negative and significant effect on dividend per share of deposit money banks in Nigeria. It was recommended among others that Management should improve on their Earnings Per Share (EPS), Return on Assets (ROA) and Return on Equity (ROE) as they are of importance in determining the dividend payout of deposit money banks in Nigeria. Banks’ management to design an optimum dividend policy that will enhance per