Relationship between Dividend Payout and Market Price of Shares
Keywords:dividend, dividend policy, financial statement, payout, share price
This paper attempted to find out relationship between dividend payment and share price. The third important decision of a company is the amount of cash to distribute to shareholders. Dividend policy includes the percentage of earnings paid to shareholders in cash dividends, the stability of absolute dividends about a trend, stock dividends and stock splits. Two hypotheses were tested: No significant relationship between profitability and market share price and No significant relationship between profitability and market share price. For the purpose of this study, secondary data obtained from the published financial statements of the companies under consideration to guide against bias and manipulation, thereby making replication possible. Quantitative technique using StataSE12 was employed to find out what association exists if any between dividend and market share price on one hand and profitability and market share price. The results showed that there was negative correlation between share price and profitability and positive correlation between share price and dividend payment.
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