Cash Dividend Payout and Firm Financial Performance Among Listed Firms at Nairobi Securities Exchange, Kenya

Authors

  • Clion Okot
    Department of Accounting and Finance, School of Business and Economics, Moi University
  • Dr. John K. Tarus
    Department of Accounting and Finance, School of Business and Economics, Moi University
  • Dr. Diane Uyoga
    Department of Management Science and Entrepreneurship, School of Business and Economics, Moi University

Abstract

Purpose: The purpose of this study was to examine the relationship between cash dividend payout and the financial performance of firms listed on the Nairobi Securities Exchange (NSE) between 2014 and 2023. The study was anchored on the Dividend Signaling Theory and the Shiftability Theory of Liquidity, which explain how dividend policy communicates firm performance and maintains financial stability.


Methodology: The study adopted an explanatory and longitudinal research design. The target population comprised 62 firms listed on the NSE during the study period. Secondary data were obtained from the NSE Handbook, company websites, and Capital Markets Authority publications. Data were analyzed using SPSS Version 21, employing both correlation and regression analyses to establish the relationship between dividend payout and firm performance. Model summaries and statistical tests were generated to assess the significance of the findings.


Findings: The results indicated that dividend per share had a statistically significant and positive effect on firm financial performance, suggesting that higher dividend payouts enhance investor confidence and market valuation. However, financial leverage showed no statistically significant relationship with firm performance, implying that debt levels may not directly influence profitability or value creation within the study context.


Conclusion: The study concludes that dividend policy plays a vital role in shaping firm performance and investor confidence among NSE-listed firms. Consistent and transparent dividend distribution enhances a firm’s reputation and market value, while excessive reliance on debt financing may not necessarily improve financial outcomes.


Value: This study contributes to the empirical literature on corporate finance by providing evidence from an emerging market perspective. It underscores the importance of sustainable dividend policies as tools for value creation and market signaling. The study recommends that firm managers maintain transparency in dividend declarations and adopt balanced capital structures to ensure financial stability. Moreover, policymakers such as the Capital Markets Authority and the Nairobi Securities Exchange should strengthen regulatory frameworks to promote prudent borrowing, consistent dividend disclosures, and long-term corporate growth in Kenya’s capital market.