Dividend Policy and Financial Performance of Deposit Money Banks in Nigeria
Abstract
The overarching goal of financial management is to optimize a company's value for its owners and stakeholders. To achieve this, managers focus on making strategic decisions in three key areas: investment, financing, and dividends. The significance of dividend policy in influencing financial performance is well acknowledged, yet Nigerian banks continue to grapple with the challenges of optimizing their dividend policies to maximize financial performance. The broad objective of this study is to evaluate the relationship between dividend policy decisions and financial performance of Deposit Money Banks in Nigeria. The study was anchored on the Signalling Theory and adopted a longitudinal research design. The population of the study consisted of all the Deposit Money Banks in Nigeria as at 31st December 2024. The data for this study was obtained from the annual reports and accounts of the sampled banks. Findings of the study indicated a significant positive relationship between retained earnings ratio, price earnings ratio, and dividend payout with financial performance of listed Deposit Money Banks in Nigeria. The study also showed that dividend per share and dividend yield have no significant positive relationship with financial performance. Based on the findings of the study, it is recommended amongst others that Nigerian banks should maintain a balanced dividend payout ratio, increasing payments to shareholders while ensuring sufficient retained earnings for growth, to boost return on equity and overall financial performance.
Keywords
Dividend PolicyReturn on EquityFinancial PerformanceRetained EarningsDividend Per ShareEarnings Per Share. I.
References
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