Factors Influencing Dividend Payout Decision Of Financial And Non-financial Companies Listed On Nairobi Securities Exchange

Abstract

Purpose: The purpose of this study was to examine the factors influencing dividend payout decision of financial and non-financial companies listed on Nairobi securities exchange. Methodology: The study conducted a census on 33 financial and non-financial firms listed on the NSE consistently since 2003 to 2012.Panel data was analyzed using random effects Tobit and random affects probit models. The findings indicated that four variables; financial leverage, business risk, profitability and Earnings per share significantly influenced the amount of dividend paid. Results: The findings indicated that four variables; financial leverage, business risk, profitability and Earnings per share significantly influenced the amount of dividend paid. Based on the findings, the study concluded that EPS, financial leverage and business risk play a key role in making the decision to pay or not to pay dividends. Earnings per share influences the decision to pay positively while both financial leverage and business risk influences the decision to pay dividends negatively. Unique contribution to theory, practice and policy: The study also recommends that managers may use the study findings when making the dividend payout policies since they will be given useful information regarding which factors they may consider when determining the dividend payouts