The Relationship Between Selected Company Characteristicsand Dividend Payout Ratio of Agricultural Firms Listed at the Nairobi Securities Exchange

Abstract

Dividend policy decisions are a very key part of financial management decisions. This is because dividend payments give a signal to the markets thus affecting the value of the firm. It is the percentage of earnings distributed to shareholders. Payment of dividends is the one of the most important elements in the decision making of a firm because the management have to make a decision which will be of benefit to both the firm and the shareholders. Because of this, the topic has been studied by a number of scholars but the results are still inconsistent. The objective of the research is to establish association of specific factors on dividend pay-out of agricultural firms quoted at NSE. Descriptive research design and a total of seven firms which make up the Agricultural segment at NSE formed the population of the study. Secondary data was entirely adopted to carry out the study and the data covered a period of six year for the period between 2012 and 2017. Descriptive statistics was the preferred method to carry out the analysis of the data. The results established a strong and positive correlation linking firm profitability and ratio of dividend payout. Further, the study found an insignificant positive correlation linking the leverage and the agricultural dividend payout ratio. Additionally, weak inverse correlation linking firm size, growth prospects and the ratio of dividend payout of the listed agricultural firms was revealed. Finally, a strong direct association was established (R=66.5%) linking firms‟ characteristic factors and ratio of dividend payout the quoted agricultural firms at the NSE. It concluded that firms‟ profitability significantly affects agricultural firms‟ dividend payout ratio. It further concluded that the ratio of dividend payout of agricultural firms is significantly influenced by their leverage. The study recommended that the agricultural firms‟ managements should come up with an optimal dividend policy and invest in adequate assets to enhance profitability among these institutions.