Cost of Capital and Dividend Policy of Quoted Food and Beverage Manufacturing Firms in Nigeria
Abstract
This study examined the effect of cost of capital on dividend payout ratio of quoted food and beverage manufacturing firms in Nigeria. Required cross sectional data were sourced from financial statements of the quoted firms from 2015-2024. Dividend payout ratio was proxy for dependent variable while cost of debt, cost equity and weighted average cost of capital were proxies for independent variables. Descriptive and inferential statistic was used data analysis method with the aid of statistical package for social sciences. The study 78.7% of the variations in the dependent variable (dividend payout ratio) was explained by the independent variables (cost of debt, cost of equity and weighted average cost of debt). However, 21.3% of the variations in dividend payout ratio of the quoted food and beverage manufacturing firms remained unexplained. The study found that cost of debt have positive and significant effect on dividend payout ratio, cost of equity have negative and no significant effect while weighted average cost of capital have negative and significant effect on dividend payout ratio of the quoted food and beverage manufacturing firms in Nigeria within the time scope of this study. The study recommends Management should ensure more efforts to reduce cost of equity of the quoted food and beverage firms to achieve increase profitability, increase payout ratio and equitable retained earnings for further investments for the quoted food and beverage firms. There is need for management to formulate polices of leveraging the effect of cost of debt on the dividend policy of the quoted food and beverage manufacturing firm to achieve increase profitability and optimal dividend policy that will maximize shareholder’s wealth.
Keywords
Cost of CapitalDividend Payout RatioCost of DebtCost of EquityWeighted Average Cost of Capital
References
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