Abstract:
The main objective of the study was to establish the determinants of dividend policies of companies listed at DSE. Specifically, the study aimed to identify factors that influence dividend policy among listed companies, explore the statistical relationship between determinants of dividend policy and investigate the impact of dividend policy on listed companies.
The study focused on five companies listed at DSE namely; SWISSPORT, TOL, TBL, TCC and Simba Cement. The scope of the study was limited to 8 years from 2005 to 2012. The data used from the audited financial reports of listed companies. The variables of the study were; dividend pay-out (dependent variable) and profit after tax, shareholders fund, liquidity and financial leverage (independent variable).
The findings of the study showed that profit after tax (PAT), shareholders fund (SHF), liquidity (LIQ) and financial leverage (LEV) are determinants of dividend pay-out or dividend policies of companies listed with DSE. The correlation result reveals that liquidity (LIQ) and financial leverage (LEV) are the main determinants of dividend policy.
The study found a negative and positive relationship between profit after tax, liquidity and shareholders’ funds. The higher the profit after tax, the higher the dividend pay-out. This shows that companies with higher profit after tax tend to pay-out higher dividends. The study also found a negative relationship between leverage and dividend policy.
The study concludes that the dividend policies and of companies listed at the DSE is determined by the amount of profit after tax, liquidity shareholders’ fund financial leverage of the company. The study recommends that listed company should adopt dividend policy based on their current financial circumstances, especially, based on their current liquidity positions, and not based on profit after tax.
