Determinants of Dividend Policy in Nigerian Manufacturing Firms

Abstract

Dividend policy is becoming an area of concern to different stakeholders including the researchers in recent time. Although there are existing literatures on Determinants of Dividend Policy in Nigeria, this study wishes to contribute to existing study by viewing determinants of dividend policy with a focus on listed food and beverages and cement firms in Nigeria. Dividend per Share is used as dependent variable while Return on Capital employed, Earnings per Share and Tangible Asset growth rate are used as the independent variables.Panel Data were sourced from annual report and account of the selected five (5) companies to cover a period of eight (8) years(2008 to 2015). Panel least square was employed to estimate the model built for the study. The result shows that Return on Capital employed has no significant relationship with dividend policy; Earnings per Share and Tangible Asset growth rate have significant relationship with dividend policy of firms. Moreso, only Earning per Share out of the three explanatory variables exhibit positive relationship with dividend per share while others have negative relationship. It is strongly recommended that firms should pursue effective dividend policy that will motivate investors to commit more resources in the company, and to also ensure that reasonable proportion of profit is also retained for future growth without detriment to shareholders wealth maximisation.

Keywords: dividend policy, returns on capital employed, earnings per share and tangible asset growth rate.