Determinants of Dividend payout ratio in the Nairobi Securities Exchange in Kenya

Abstract

An investor invests in a company in the hope of some financial gain, which could be in the form of dividends or capital gains or both. Dividend gain is a very important consideration for any individual considering investing in a company, so as to maximize on their wealth. The objective of this study was to identify factors determining dividend payout ratio among profitable companies listed at Nairobi securities exchange with the aim of analyzing the relationship between key variables. For the purpose of this study, profitable companies were defined as those that consistently reported profits during the study period. Twenty companies were selected from the firms listed in the NSE for the purpose of this research. Secondary data was obtained from Nairobi securities exchange. Statistical technique of multiple regression was used was used to explore the relationship between the independent and the dependent variables. The regression results identified leverage, growth and the firm size as the major determinants of DPR though it is positively associated with DPR. This research is useful to the financial managers for decision support and dividend policy making, to the various kinds of investors for their investment decisions, to scholars as it will add to the body of knowledge. It is believed that the findings will be of use to academia and practitioners in learning how profitable firms in corporate Kenya determine their dividend policy.