The Impact of Dividend Policy on Investors’ Preferences on Nigeria’s Capital Market

Abstract

In the world of investment, making a good decision could be equated to making good profit, and this has led to the issue around dividend policy which has attracted the attentions of investors and researchers over the years. This study investigated the impact of dividend policy on investors’ preferences on Nigeria's capital market. Specifically, the study investigated the relationship between dividend per share, dividend yield, earnings per share and share price as measures for dividend policy, with equity ratio as a measure for investors preferences. Using quasi experimental design, secondary data were sourced from NSE closure of register and the financial reports of 12 firms listed on the Nigerian Stock Exchange for the period 2009-2019. Four hypotheses on the relationship between dividend per share, dividend yield, earnings per share and share price with equity ratio, were tested using the OLS regression analysis. The study found that all the independent variables except share price are negatively and insignificantly related to equity ratio. Nevertheless, the independent variables have combined positive and significant relationship with equity ratio. Therefore, it is concluded that dividend policy impacts on investor’s preferences but not without some other external effects. It is therefore recommended that firms should pay attention to their dividend policy especially share price; give detailed information on their dividend policy through their annual report; and investors should look beyond share price to observe other dividend policy variables that may give them information on the future of the stock of interest.