Dividend Policy and Financial Performance of Insurance Companies Listed in Nairobi Securities Exchange, Kenya
Murimi, Kiruja Vincent
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The profit of a firm can be paid out as dividends or be re-invested. There are a number of reasons why the firm should pay dividends or not. Investors pay attention to dividends and therefore the dividend policy behaviour is still an issue of concern in finance literature. Whereas some of the insurance companies have been performing well in terms of assets growth and profitability, there are other listed insurance companies whose return on assets has been dwindling over the years under study. This was partly attributed to poor dividend policy. The research aimed at filling the research gap by establishing the importance of effective dividend policy and the link existing between1 dividend1 policy1 and insurance companies’ financial1 performance. 1 The1 goal guiding the study1 are; to determine the influence of dividend payout ratio, retained earnings, and dividend yield on financial1 performance1 of1 insurance companies1 listed1 in1 the1Nairobi Securities Exchange. A descriptive1 design1 was1adopted. Secondary data from4financial4statements of the Nairobi Securities Exchange listed insurance companionship period 2013-2018 was collected. Descriptive statistics and regression model using SPSS software version 21 was used4for4the4data4analysis. The study concluded that dividend payout does not affect the performance of1 insurance companies listed in Nairobi securities exchange, 1 retained earnings has a positive significant effect on financial performance1 of1 insurance1 companies1 listed1 in1 Nairobi1 securities1 exchange, 1 and1 that1 dividend yield has a positive effect on1 the1 performance1 of1 insurance1 companies listed1 in1 Nairobi Securities Exchange1 in financial terms. The1 study1 recommends that Insurance companies listed1 in1 Nairobi1 securities1 exchange1 should1 ensure1 that1 they1 have1 a1 good1 and1 robust1 dividend1 policy1 in1 place1 that1 can1 enhance1 their1 level1 of1profitability1and1also1attract1investments1.The1study4recommends4that4Insurance4com panies4listed4inNairobiSecurites Exchange4should develop policies and laws governing dividend payment and should be strengthened and enforced to ensure a more frequent dividend payment in order to increase their market values through share price increases. It1 is1 also1 recommended1 that1 an1 investment1 policy1 should1 be1 developed1 and1 implemented; 1 this1 will1 ensure1 that1 the1 management1 is1 not1 left1 to1 decide1 on1 how1 to1 use1 the1 little1 surplus1 left1 but1 would1 rather1 be1 guided1 by1 the1 investment1 policy. 1 The board4 of4 directors4 of4 insurance4 firms4 should4 be4 prudent4 in4 declaring4 dividends4 as4 higher4 dividend4 yield4 could4 mean4 that4 the4 share4 price4 is4 underpriced4 which4 could4 affect4 future4dividends.