A comparative analysis of the dividend decisions of Kenya breweries limited and British American Tobacco (K) limited

Abstract

The research project provides a comparative analysis of the dividend decisions of two major companies in Kenya: Kenya Breweries Ltd and British American Tobacco (K) Ltd. The paper surveys how these two companies determine the division of a company's earning between retained earning and payments to shareholders. It is important to note that retained earnings are important as they are used as a form of internal financing hence can facilitate the company's undertakings in carrying out it's investments decision. However it is worth remembering that shareholders require a return from their share investments.

Further the paper recognizes that a company's management should come up with a policy that balances these two delicate and conflicting goals. In paying out of dividends a company should consider its liquidity position, its rate of expansion and stability of earnings among others.

In analyzing the dividend decision of these two companies, the project incorporates such parameters as earnings per share; dividends per share, after tax profits, retained earnings among other parameters for the period 1992-2002, with the aim of establishing the consistency of their dividend decisions.

This then directly implies that dividend decision should not be carried out in isolation of the financing and investment decisions.

The major objectives of carrying out this research were to:-

i) To determine the dividend policy followed by two companies in the industrial and Allied sector (i.e Kenya Breweries Ltd. and British American Tobacco (k) Ltd.

ii) To establish the consistency of the dividend decision of these two companies.

iii) Establish the impacts and effects of the dividend decision to the companies and shareholders.