Determinants of Dividend Payout of Firms Listed in Nairobi Securities Exchange

Abstract

The maximization of wealth is the core of value of any business. The shareholders demand for the value for their investment. The repayment of the shareholder can be done through the dividend payout. The importance of dividend payout cut across all the companies and has been subject of interest for entrepreneurs and the investors. The study was interested in elaborating the determinants of dividend payout. Contextually, it analyzed the firm listed at NSE for the period spanning from 2016-2020 thereby totaling to 5years. The theories anchoring the study include the pecking order, dividend irrelevance and signaling theory. The study investigated the nature and behavior of the data by undertaking intensive diagnostic such as normality, multicollinearity and autocorrelation. The predictor variables considered include; firm size, leverage, profitability and growth. All the variables exhibited positive correlation except the firm’s size. The regression computation opines that all the four explanatory variables accounted for 84.3% of all the influencers of dividend payout. 15.7% represented other factors determining dividend payout but were not prioritized for the research. Based on the findings, the autonomous was -3.279. An increase in firms causes negative change in dividend payout by 3.8%. Moreover, a single increment in the leverage translates to 60% increment in DPO. An addition of one unit in profitability causes 72% positive change in DPO and an increment in growth by one unit causes changes in DPO by 39.7%. Moreover, the sum of squares of 121.408 with the mean square of 30.352 under the 4 degrees of freedom. Additionally, sum squares of 22.668 and mean square of 0.072 under the 315 degrees of freedom. The P value of 0.001 is less than 0.05 hence statistically significant. The study recommends for efficiency and productivity. Additionally, the study suggests the research regarding technological determinants of dividend payout, policies, strategies and current trends.