Financial Performance and Dividend Payout of Listed Companies in Nigeria

Abstract

Purpose: Despite it critical attention received in finance theory, dividend policy remains one of the most controversial issues in corporate finance, hence, financial economists have engaged in modeling and examining corporate dividend policy and earnings as they affect stock prices. However, only few studies were conducted in respect to financial performance and dividend payout. Therefore, the motivation of this study to examine the effect of financial performance on dividend payout of the listed companies in Nigeria.

Design/Methodology: The study adopts ex-post facto research design as data were collected from the annual reports and accounts of the companies for the period of five years (2016-2020). The data collected were analyzed using both descriptive and inferential statistics.

Findings: The result of the analyses revealed that return on assets and return on equity have positive and significant effect on the dividend payout ratio of the listed companies in Nigeria, while return on capital employed has negative but significant effect on the dividend payout ratio of the companies.

Implications: The financial performance of the listed companies in Nigeria has a positive and significant effect on the dividend payout of the companies. Thus, in order for the listed companies in Nigeria to boost their dividend payment, the management of the companies should maximize the utilisation of the capital employed to generate more income that will add value to the companies, while ensuring the effective and efficient management of the resources of the shareholders to boost return on asset and return on equity, since they were found to have positive influence on the dividend pay-out ratio of the sampled firms.