Profitability and Dividend Policy of Consumer Goods Firms in Nigeria

Abstract

Profitability is the terminology for describing the efficiency and hence success or failure of a business venture. It connotes the ability of a business to produce a return on an investment based on its resources in comparison with an alternative investment. This study examined profitability and dividend policy of consumer goods firms in Nigeria in Nigeria for a period of (2015-2022). Specifically, the study examined the effect of ratio of net profits to revenues on dividend payout ratio; assessed the effect of ratio of profit after tax to total assets on dividend payout ratio; determined the effect of ratio of profit after tax to total equity on dividend payout ratio. The dependent variable is payout ratio which is the proxy for dividend policy. The study covered a sample of nine consumer goods firms within an eight-year time frame from 2015 to 2022. The panel regression model was employed and Hausman test used to select between Fixed and Random effects for result interpretation. The summarised findings showed that firm profitability has significant effect, driven by net profit margin and firm size, on the dividend policy of consumer goods firms in Nigeria. The study concluded that firm profitability is determinants of dividend policies of quoted firms in Nigeria. The study recommends that investors with risk adverse attitude needing quick return on investment should consider larger firms that have higher propensity to pay dividend.