Stock Indices are designed to gauge market performance and guide investors in making investment decisions, especially in stock portfolio mix and management. Dividend Policy is an important finance function; organizations need to decide how to distribute dividends and how much dividends to retain and be ploughed back into the business. Between 2009 and 2018, the Nairobi Securities Exchange depicted erratic performance in making investment decisions during the financial crisis and volatility of the securities exchange. This study, therefore, sought to investigate the mediating role of macroeconomic factors on the relationship between dividend policy and stock return in Nairobi Securities Exchange to help investors make decisions amidst the erratic performance of the burse. The study employed longitudinal times series study regression analysis and used structural equation modeling (SEM) to assess mediation relationships. Results revealed that macroeconomic factors mediate the relationship between dividend policy and stock return; interest rate fully mediates the relationship between dividend per share, payout ratio, and stock return (p=0.00) and partially mediates the relationship between dividend yield and stock return (P=0.00). Inflation fully mediates the relationship between dividend per share, payout ratio, and stock return (p=0.00) and partially mediates the relationship between dividend yield and stock return (p=0.00). Gross Domestic Product does not mediate the relationship between dividend yield, payout ratio, dividend per share, and stock return (p= 0.76), (p=0.91) and (p=0.90), respectively.