Relationship among current year earnings per share, preceding year dividends per share and current year dividends per share for firms listed at the Nairobi stock exchange

Abstract

Corporate dividend policy has been a thing of concern to the financial managers and firm's at large. It's critical because of its influence on other financial and investment decisions. The main objective of this project is to establish the relationship among the current earnings per share, preceding year dividends per share and the preceding year dividends per share. To achieve this objective a sample of 20 firms listed at the NSE for a period of seven years from 2003 to 2009 was selected for analysis. Both descriptive and quantitative methods were used to analyze the data collected from the NSE and CMA library. The descriptive statistics computed includes the mean and the Standard deviations. The quantitative methods utilized include the Pearson's correlation coefficients and regression analysis. The regression models were generated using the SPSS software. The result of the study shows that both the current earnings per share and preceding year dividends per share significantly influence the dividends policies of Kenyan firms. There is a strong and positive relationship between DPS 1•1 and DPS 1 which means that firms use past dividends as benchmarks in setting their current dividends. The relationship between EPS 1 and DPS 1 is positive which suggest that an increase in earnings may trigger an increase in dividend levels. The study also found out that DPS 1 is more sensitive to past dividends that current earnings.