Dividend policy and firm performance: A sectoral analysis of Nairobi securities exchange listed firms
The relationship between dividend payout and firm profitability has attracted a lot of attention fi·om finance scholars with no universal agreement. Benartzi eta! (1997) found no evidence that dividends contain information about changes in earnings. They stated that "while there is a strong past and concurrent link between earnings and dividend changes, the predictive value of changes in dividends seems minimal." Amidu (2007) found that dividend policy affects finn performance especially the profitability measured by the return on assets. The results showed a positive and significant relationship between return on assets, return on equity, growth in sales and dividend policy. This study aims at determining the relationship between dividend payout and firm performance across the NSE 20 listed firms fi·om the period 1994 to 2013. The return on equity was the proxy for performance and was regressed against dividend payout, firm size, leverage and growth. Panel data models, that is, fixed and random effects models were employed in order to capture the differences in the industries. The results indicated that a positive and significant relationship existed in the conunercial and service sector, and a significant relationship was observed in the teleconununications and agricultural sectors. All other sectors had no significant relationships between dividend payout and firm performance.