The Dividend Practices of Publicly Quoted Companies in Kenya

Abstract

Dividends are very important considerations for any rational investor. Ultimately, most rational investors would invest in a company because they expect to receive dividends. It is this factor which makes a company's dividend policy be of paramount importance. However, the dividend policy of a firm is not always easy to formulate. It is first of all a very complex division where numerous factors must be weiKhted. The weight placed on the numerous factors does in turn influence the practice. The ultimate objective of any dividend policy pursued by the firm is the maximization of its shareholders wealth. This study investigates the dividend practice and factors weighted by Kenyan publicly quoted firms when making the dividend devision. The results obtained about dividend practice and factors weighted are discussed in this report. Bbth cash and stock dividends were found to be popular forms of earninbs distribution. It was also found that most comapnies lack a systematic dividend decision makinb procedure. As such, most companies end up considering not more than two (cash and earnings) factors when deciding how much earnings to distribute. However, in total, most of the factors which iv theory says should be considered were also mentioned here and there. The researcher recommends that the dividend decision be taken more seriuusly (than is being currently done). Management should try to consider as many factors as possible so that the firm can at least have a faint hope of maximizing its value to its shareholders. Ad hoc dividend decisions should be avoided so as not to lose shareholders confidence.