The Relationship Between Earnings Per Share And Dividend Per Share Of Equities For Companies Quoted At The Nairobi Stock Exchange

Abstract

This study was undertaken with a view of establishing whether there exist any relationship between the Earnings Per Share and Dividend Per Share of equities for companies quoted on the Nairobi Stock Exchange; for the years from 2000 to 2004. Data extracted from published financial statements and published in the NSE Handbook 4th Edition and was analyzed using SPSS with focus on regression model and was presented using tables, graphs and charts. The findings of the study reveal that there is a significant relationship between Earnings Per Share and Dividend Per Share. The findings also reveal that the relationship between the two variables is significant. This is in line with the expectations that dividends must be paid out of company earnings. Of interest is the fact that whereas the Agricultural sector, Commercial and Service sector, Industrial and Allied sector and the Alternative Investment Market of the market report a positive relationship between the Dividend Per Share and Earnings Per Share the Finance and Investment sector report a negative relationship between the two variables. The exception in the later may be explained by the fact that the sector may occasionally be paying dividends out of past earrings.