Financial Factors Affecting Dividend Pay-Out in Kenya, Evidence from Listed Manufacturing Firms in Kenya

Dividend pay-out signals the performance of a firm this preposition is supported by the dividend signaling theory. A theory that suggests, when a company announcement of an increase in dividend pay-outs it indicates a positive performance. Working on this signalling theory preposition it could therefore be expected that firms with high dividend pay outs have high stock prices, another signal of a high performing firm. However, this is not the case in the Kenyan manufacturing sector. Manufacturing firms in Kenya are paying high dividends relative to their stock price. Following this disproving fact, this study looks at the financial factors affecting dividend pay outs in the Kenyan manufacturing sector.  The dependent variable is Dividend Pay-out measured by dividend per share over earnings per share. The financial factors considered in this paper are Profitability, Liquidity and Leverage, while firm size was used asthe moderating. Secondary data for a sampled 7 out of 10 manufacturing firms listed in Nairobi Security Exchange over a period of 10 years (2007 to 2016) was used for the analysis using a Tobit Random Effect Model. The study findings indicated that Profitability and Leverage significantly influence a firm’s dividend pay-out while Liquidity has an insignificant effect. Moderating variable Firm size was considered as a significant determinant of dividend pay-out.