Abstract:
An investor invests in a company in the hope of some form of financial gain, which could be in the form of dividends or capital gains or both Dividends and Capital gains. Dividends are very important consideration for any individual considering investing in a company: so as to maximize on the shareholders wealth. This study investigates the determinants of dividends, with the aim of analyzing the relationships between the variables. A sample of twenty companies that form part of the Nairobi stock exchange were analyzed to bring out this relationship. The regression model was used to study the relationship between the dependent variable and the independent variables. A regression of dividends against the four variables namely, liquidity, working capital, net profits and market price, indicate that these variables are very important in the determination of dividends among publicly quoted companies in Kenya. The result indicated that the R2 obtained was 0.60 for 12 companies out of the 20 companies studied. However, some companies do not put into consideration some of these factors in the determination of dividends. The t-test was also used to investigate the relationship between individual variable to the dependent variable. The f-ratio was used to investigate how the four factors contributed to the dividends collectively. According to the dividends payout trend it was observed that most companies have maintained a constant dividend payout trend over the years under study. T o achieve best results, more variables should be included in the analysis.
