Analysis of Financial Determinants of Dividend Payout among Construction and Allied Companies Listed in Nairobi Securities Exchange, Kenya

Abstract

Despite the potential benefit listed firms stand to accrue from paying dividends, including improvement in stock prices and increasing investor demand raising the stock value, an evaluation of dividend payouts by listed construction and allied companies at the Nairobi Security Exchange over a 10-year period reveals dismal payout trends, in comparison with other

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listed companies. This brings to question; what factors determine dividend payout among listed construction companies. While existing research in the Kenya academia have looked into the factors that influence dividend payments, none have concentrated on construction firms registered on the Nairobi Securities Exchange, warranting the present study. The goal of this investigation was thus to look at the factors that influence dividend payout among construction organizations quoted on Nairobi Security Exchange. The study specifically sought to determine the influence of the profit level, leverage, liquidity and firm size regarding the distribution of dividends among constructing and related businesses quoted on the stock exchange at Nairobi Security Exchange. The study used a descriptive design and was based on signaling theory, pecking order theory, and the bird in the hand theory. A census was undertaken of all five construction and related enterprises that are listed on the Nairobi Securities Exchange. A secondary data collecting schedule was used to obtain secondary data. The investigation used panel data for a 10-year period from 2011 to 2020. The study performed both descriptive analysis including means and standard deviations and inferential analysis including Pearson correlation and simple linear regression models. Results indicate that profitability (β = .417, p = .029<.05), leverage (β = .523, p = .043<.05), liquidity (β = .431, p = .035<.05) and firm size (β = .661, p = .019<.05) significantly influence dividend payout among construction and allied companies listed at Nairobi Security Exchange. The investigation thus concludes that dividend payout for constructing and allied firms quoted at Nairobi Security Exchange is significantly determined by the profit level, liquidity, leverage and firm size do not. According to the report, building and related firms listed on the Nairobi Securities Exchange must try to raise their earnings in place to enable dividends payment arrangements; ensure that they have the capacity to fulfill both anticipated and unanticipated cash demands; and work towards growth for operational efficiency.