Key Features:

- No of Pages: 73

- No of Chapters: 05

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Introduction:

Abstract

Dividend policy refers to management’s long-term decision on how to deploy cash flows from business activities-that is, how much to invest in the business, and how much to return to shareholders. The determination of the amount of dividends payable is an important decision that companies undertake since the objective of the firm is to maximize the shareholders’ wealth as measured by the price of the company’s common stock. The study concluded that higher pre-tax risk adjusted returns associated with higher dividend yield stocks to compensate investors for the tax

disadvantages of returns affected tax incentives and that investors whose portfolios had low systematic risk

preferred high-pay-out stocks. This was consistent with Brennan’s model (Brennan, 1970).The study also found out

that an increase in firms’ stocks trading volume affected the share price and investors who wanted current

investment income owned shares in high dividend payout firms and this was consistent with the findings of Botha (1985). The study further concludes that free cash flow caused conflict between management and shareholders which in turn affected the share price and that the executive option plan persuaded management to reduce corporate dividends by an amount that was equal to the option plan. This was consistence with the findings of Lambert, Lanen and Larker (1989). The study recommends that companies consider all pertinent issues before issuing dividends.Since the share market is positively responsive to the dividend announcement, companies should always strive to pay divided consistently for their shares to perform well at the stock exchange. Dividend policy have an effect on the share prices of the firms quoted at NSE thus, companies (firms) should pay dividends to maintain high share prices.

Table of Content

Chapter One

1 Introduction

1.2 Statement of The Problem

1.3 Objective of The Study

1.4 Research Question

1.5 Research Hypothesis

1.6 Significance of the Study

1.7 Scope of the Study

1.8 Definition of Terms

Chapter Two

Literature Review

2.1 Introduction

2.2 Conceptual Review

2.3 Theoretical Review

2.3.1 Gordon’s Growth Valuation Model Theory:2.3.2 Graham, Dodd and Cottle Theory 1962.

2.4 Empirical Review

Chapter Three

3.0 Methodology

3.1 Introduction

3.2 Research Design

3.3 Population of this Study

3.4 Sample and Sampling Procedure

3.5 Data Collection and Processing Procedure

3.6 Research Hypothesis

3.7 Statistical Technique

Chapter Four

Data Presentation, Analysis and Interpretation

4.1 Introduction

4.2 Analysis and Interpretation of Findings

4.3 Test of Hypothesis

Chapter Five

Summary, Conclusion, and recommendations

5.1 Summary

5.2 Conclusion

5.3 Recommendations

References

appendix

Introduction

The importance of dividend policy in business world cannot be over emphasized. A number of stakeholders, including investor, managers, lender, financial consultant/ analysts etc. use It in making informed decision. Considering the importance of dividend policy from the investor” point of view dividend is not only a source of income but also a way of assess company from investment point of view. In other words, their main objectives of investors in the stock market is to maximize the expected return at low level of risk and this return may be in the form of dividends or capital gain in effect, maximizing shareholders wealth depends on the dividend policy of the company because of these shareholders would satisfy their purchasing and consumption pattern (Khan 2012).

In companies perspective selecting a suitable dividend policy is an important decision for the company because flexibility to invest in future projects depends on the amount of dividends that they pay to their shareholders. As such, certain important factors like managerial and behavioral environment, firms profitability ratio, the willingness of the company etc. are considered to the companies in designing their dividend policies (Khan 2012) Ling, Matalip, Sharin and Ethman (2008) studies the characteristic of dividend paying companies of Malaysia and found out that dividend paying companies are more profitable, less risky and more mature in their activities or as compared to non-dividend paying companies. Their results also indicate that manager of Nigeria companies understand the important of paying dividend and they pay dividend even if the companies are not earning profits.

Dividend policy which involves, itself in determining the amount to be paid to the shareholders and that to be retained in the company for future reinvestment in profitable projects or for other Justifiable needs is one of the cardinal issues involved in financial management and as such as it has consistently received serious attention of researcher even in the recent time (Chidi Agu and Ade, 2013, Altroudi and Michemi, 2013, Ramadan 2013; Zakaria, Muhammed and Zulkifi, 2012, Salisu 2012. In spite of ever increasing focus on the dividend policy issue by several authors/ researcher, there has never been universally accepted conclusion as the empirical analyses have always brought mixed result black (1976) expresses a view concerning dividend policy that “ the harder we look at the dividend picture the more it seems like a puzzle with piece that don’t fit together” this was corroborated by Brealy and Myers(2005) who describe dividend policy as one of the top ten most difficult unsolved problems in financial economics.

One major area of conflict is whether or not dividend policy influence the market price of firm” share and by extension, the shareholder wealth in this connection two main school of thought subsist; the first represents the view of some researcher that dividend policy impact on companies share price(Salih,2010 Petto, 1972, Gordon 1963 etc. and the second being the view of those who claim that dividend policy bears no relevance in the corporate market value (Fairecly, Baker and Edelman 1986, Baker, Farrely and Edelman 1985 , Miller and Modiglan, 1961 etc) and so every research focusing on the relationship between dividend policy and stock price is an attempt to confirm or disprove the above hypothesis.

In Nigeria, drastic development were experienced in the era of indigenization an in the storm of global crisis that hit the nation’s economy, which brought down the market value of the equity shares of listed companies the experience came to fore in most emerging economies of the world, anyway, following the two events, firms in Nigeria had continued had to ought survival ad maximize share price return, the situation which seemed to have called the attention to the issue of dividend policy as it affect sharing pricing yet, there hasn’t been consensus of researcher finding (Adefila, Oladipo and Adeoti 2013, Adaramola 2012, Uwuigbe, Olowe and Godswill 2012, ETC.

This project this intents to examine the patter of dividend policies in Nigeria, assess the impact dividend policy on Nigeria stock exchange (NSE) listed companies” share market value and determine the extent of the impact if any the dividend has on the stock price.