Determinants of Dividend Policy of Manufacturing Firms in Nigeria

The study set out to identify the determinants of dividend policy of firms in Nigeria from 1984 to 2020. Using the modified Lintner model as the theoretical framework, we analyze data on listed Nigerian manufacturing firms for 1,101 firm-years from 1984 to 2020. Data on dividend, profit after tax, total distributable earnings, leverage, turnover growth, firm size and market to book value were obtained from annual reports of firms. Results of sectoral analysis show that manufacturing firms’ dividend policies depend on profit after tax, preceding year dividend, size and growth of firms. The results also show that the manufacturing firms’ dividend payout depends more on profit after tax and past dividend and in general the objectives of the firm. However, there is enough evidence to conclude that profit after tax and past dividend are key determinants of firm dividend payment in Nigeria. There is need for firms to improve on their performance and increase their profitability level to have enough to transfer to revenue reserves for future dividend payments, especially when there is recession in the economy, as dividend payment is a key factor in growing investors’ confidence, and in enhancing the market values of firms.