Factors Affecting Dividend Payout Ratio of Dividend Paying Firms Listed on KSE-100 Index

Abstract

The study purpose is to investigate the variables that significantly affect dividend payout ratio of dividend paying firms listed on KSE-100 index. This research uses a purposive sampling method where criteria is set to select a sample. Secondary data is collected from non-financial companies using annual financial reports from Pakistan Stock Exchange through the official KSE data portal for examining panel data models using pooled OLS regression. The results showed profitability, firm’s debt and sales growth positively significantly and asset growth, retained earnings to total equity and liquidity negatively significantly affected dividend payout ratio. This research report adds to the existing literature on dividend policy by utilizing the life cycle measure by segregating it with financial performance measure that has not yet done in the Pakistan as a developing market. Results prefer companies to focus on high liquidity, growth in net assets and RETE (life cycle) and management to use profit in the proper way and utilize assets optimally to increase dividend payout. Investors consider ROA to expect high return on dividend. It is suggested that firms pay dividends when there is a chance of decreasing profits and growth rates in future in order to attract more investors and to illustrate better company’s performance in the market for increasing growth opportunities and pay maximum dividends.