Relationship Between Dividend Payment And Share Price For Companies Listed At The Nairobi Stock Exchange

Abstract

Dividend payout decision is among the basic policy confronting corporate financial officers especially on how much to pay. A number of conflicting theoretical models define current attempt to explain corporate dividend behavior. One faction see dividend as attractive and as a positive influence on share price, the second group believes that share prices vary inversely with dividend payout level and the third group believes that dividend policy is irrelevant on share prices. This research paper tests the relationship between dividend payment and share prices of companies quoted at the Nairobi Stock Exchange. Data was collected from the annual reports and share price schedules obtained from the Nairobi Stock Exchange. A sample of 17 companies was selected consisting of all the companies quoted consistently at Nairobi Stock Exchange for a period of 5 years from 2006 - 2010. There are 56 listed companies at the Nairobi Stock Exchange that formed the population for this research study. The secondary data collected was then analyzed using simple linear regression and correlation analysis through the use of Statistical Package for Social Science (SPSS) version 17. The findings of the research established that there was weak positive relationship between the dividend payout ratio (DPOR) and share prices of companies quoted at the Nairobi Stock Exchange.