An Analysis Of The Relationship Between Dividend Changes And Future Profitability Of Companies Quoted At The Nairobi Stock Exchange

Abstract

This study sought to investigate whether or not there is a relationship between dividend changes and future profitability. The major source of data was financial records of publicly quoted companies obtained from the Nairobi Stock Exchange. Data from the various companies was gathered and analyzed using both physical comparison and also using the regression technique provided by SSPS package. The model was regressed and the resultant equations were obtained. Each variable present in the model was tested for its significance in the model using the T statistic and the F test. The model was then tested to see how much the variables explain the variations as opposed to other variables that were not being tested. The standard error for the model for each year was compared and the results obtained indicate that dividend changes reflect future profits in a company. In conclusion it was obtained that a relationship does exist between dividend changes and future profitability of a company