Dividend Policy and Profitability of Firms Listed at Nairobi Securities Exchange, Kenya
DOI:
https://doi.org/10.70619/vol6iss4pp27-39-814Keywords:
Dividend policy, profitability, dividend payouts, dividend payments, and dividend yieldsAbstract
Several listed businesses on the Nairobi Securities Exchange have been facing a variety of issues, including declining earnings, trading suspensions (7.6%), and/or complete delistings (10.6%). In 2023, shares of the apparel retailer Deacons East Africa, the sugar company Mumias Sugar Company, and the National Bank of Kenya were prohibited from trading. The purpose of this study was to examine the relationship between dividend policy and the profitability of companies traded on Kenya's Nairobi Securities Exchange. The primary objective of the research was to identify correlations among dividend payments, dividend yields, and the financial performance of NSE-listed companies. A total of 305 observations were derived from the data, which covered the five-year period from 2020 to 2024. Descriptive statistics, panel regression, and Pearson correlation were used to examine the data. The study found that dividend payouts, dividend payments, and dividend yields are positively and significantly correlated with profitability. Regression analysis also yielded similar findings: dividend payout (β=0.673, P=0.008), interim dividend payment (β=0.146, P=0.002), and dividend yield (β=0.163, P=0.000) were positively and significantly associated with profitability. Based on the study's findings, the study recommended that firms listed on the NSE strike a balance between retained earnings and dividend payouts to ensure sufficient reinvestment to sustain long-term profitability.
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