Determinants of Dividend Payout for Companies Listed at the Nairobi Securities Exchange

Abstract

This paper sought to establish the determinants of dividend payout for companies listed at Nairobi Securities Exchange (NSE). The objective of the study was to establish how and the extent to which company earnings, liquidity, profitability, and company size determine dividend payout for firms listed at the NSE. The study relied on secondary data which was analysed using SPSS software version 20 and the results presented in tables. The results consistently support the potential association between the four independent variables and the dependent variable (dividend payout) for firms listed at the NSE. Earnings, profitability and company size had a positive correlation with dividend payout while liquidity had a negative correlation with dividend payout. At 5% level of significance, earnings, liquidity and profitability were found to be statistically significant while company size was not significant. The study used the Fstatistic to test the overall significance of the regression model and the model was found statistically significant and suitable for this study. The model had an R2 of 0.7769 implying that variations in the four independent variables accounted for 77.7% of variations in the dependent variable which was further proof thatthe model was statistically significant and suitable for the study since it explained nearly all the variability of the dependent variable. It is against this backdrop that this research study arrived at conclusions including that profitability had the greatest influence on dividend payout for firms listed at the NSE and recommended among others, that companies listed at the NSE observe and manage well their policies dealing with the four independent variables. Finally, the study made various recommendations among them, further similar research using multiple economic factors. This will enable a thorough research as it gives a wholesome approach to establishing determinants of dividend payout for firms listed at the NSE.