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Esther Nyanchama Nyamosi - Master of Business Administration, Jomo Kenyatta University of Agriculture and Technology, Kenya

Dr.  Jane Omwenga - Lecturer, Jomo Kenyatta University of Agriculture and Technology, Kenya


This study was geared towards investigating the effect of dividend policy on stock prices among listed Manufacturing and Allied companies in Kenya. To achieve the objective a descriptive survey design was used. The target population of the study included the top and middle level managers from operations department and finance department involved in compiling financial data leading to preparation of financial statements of all the 10 listed Manufacturing and Allied companies. The sample size of the population included 30 officers, 3 from each selected companies. The study used primary data which was collected by a semi-structured questionnaire. Data was analyzed using descriptive statistics and regression analysis. The study found that dividend policy affect stock price positively and dividend policy leads to high performance of Company’s shares at NSE. It further established that free cash flow affect stock price to a great extent and an increase in Free Cash Flow lead to an increase in Stock prices. The study also established a significant relationship between tax incentives and stock prices and also a unit increase in Clientele effect lead to an increase in Stock prices. From the inferential analysis, the four independent variables that were studied explain 71.1% of the variables affecting Supply stock price as represented by R Squared (Coefficient of determinant). The ANOVA model is statistically significant in predicting how dividend policy, Free Cash Flow, Tax incentives and Clientele effect affect stock price. This was because the f-significance value of p of less than 0.05 was established (p=0.002 <0.05). The study concluded that sustenance and viability of the dividend policy in their firm is very viable and sustainable as compared to its contributions towards share prices and investment decisions at NSE affect the share prices of the company positively and paying of dividends to reduce the free cash flows had enhanced the performance of the company. The study also noted that low taxation rate of dividends acts as an incentive to investors looking to experience some tax cuts hence savings in the long run and also based on dividend policies the firms attracts different clientele and also firms paying lower dividend attract clientele that desire capital appreciation, while those firms which pay higher dividends attract clientele that require immediate income in the form of dividend. The study therefore recommended that the management of the listed firms should conduct a research on the different dividend policies to identify the one that would help to maximize their firms’ stock price. Further researcher studies should be done in the Kenyan economy outside of the NSE, that is, for private firms to establish whether the same conclusions will be arrived at. 

Full Length Research (PDF Format)