policy is an instrument use by the management of a company to respond the behavioral
pattern of the owner of shares i.e shareholder.
While divide is the portion or reaction of company’s profit that is
distributed to the shareholders. There
are various method of divided policy depends on the policy of organization this
is to say that dividend policy varies from one company to the other. But there is common established fact with
regards to the dividend policy. Ti is
purely an indoor management affair.
A lot has
been said by some renowned theorists authors operators and regulators of the economy
as regard to dividend policy and its effect on market value of shares.
and Miller model a theorist postulate in their irrelevance theory that dividend
has nothing to do with market value of shares based on assumption while of
shares based on assumption while Walter’s and Gordon’s models are of relevant
theory that a value of shares respond proportionality to the dividend trend.
Gordon models goes further by testing his thesis by way of econometric equation
to substantiate his argument likewise efficient market hypotheses (E.M.H) shows
how the forces of demand and supply dictates the value of shares in relations
to dividend policy and the problem encounter in random walk.
research work reveal other factor that is to be considered to determine the
value of shares like investment opportunity viability of the company and
research work was carried out using two companies as a case study with their
five years financial statement. This
enable us to critically establish the real effect of dividend on market value
of shores from one company to the other and econometric equation of Gordon’s
model was used to analyze the data by way of matrix.
Statements of problem.
Objective of the study
Significance of the study
Scope of the study
Limitation of the study
Definition of terms
Models of shares valuation
Summary of the chapter
Research design and
Characteristics of population of study
Sample and sampling procedure
Data collections and processing procedure
Instrument for data collection
Presentation and analysis of
Test of hypotheses
Summary of findings conclusion and recommendation
BACKGROUND OF THE STUDY
Dividend policies decision is concerned with the
determination of the corporate earnings that is generated through the
successful operation of the company in a financial year, which is to distribute
among the key players that ensure the realization of the successful outcome of
he operation of the organization and the amount of the proportion of this
earnings to be retained.
earnings decision policy is widely considered in the business world as strategic in corporate
finance as well as corporate
performance and growth. Dividend policy directly influences the behavioural
pattern of the investor ie. Shareholders.
Because the purchaser of the company i.e shareholder actually buys a
dividend expectation; because of the dividend policy decision implication on
the behavioural pattern of the shareholder be it positive or negative the
corporate world impose the responsibility of this great task of he board room
policy decision as a tool in the strategic corporate finance as well corporate
performance and growth affect the share price as well as cost of capital. In other words on option dividend policy is
the policy that maximizes the wealth of shareholder.
obvious reasons shareholders consider impotence to dividend. The importance
that the individual shareholder places on dividends depends on his level of
wealth and preference for capital gains amongst others. In an environment with
progressive personnel income taxes the individual with more wealth will tend to
profess capital appreciation on shares then dividend. At a lower level of
income the capital gain tax rate is higher then the personal income tax rates
however the reverse is the case with increased income. The wealthy individual
among the diverse shareholders may then prefer capital appreciation on his
share due to the at mentioned reasons.
bulk of he shareholder nay not be in this category the company is then placed
in a situation of reconciling the difference or taking the potion that seems
more favovrable to the company. This is
ht some things as saying that the management of the company will take the
option that optimizes the value of he company’s shares.
It is often
claimed that the company’s investment decisions and dividend decision are
independent of the shareholder’s decision.
It should be noted that this might not be entirely true some there is
replay procedures that protected the aggrieved shareholders.
these the shareholders might exercises their right through the selling of their
shares on the stock exchange and this has negative consequences on the value of
the company’s share in the market which in turn affect the fortune of he
aim of this research work is to find out whether the in dividend pays out
stimulates responses on shares value. It
is believes in some garters that the dividend pay out has something to do with
value of shares yet some people stated otherwise. Dividend in this content means the amount
distributed to shareholders of a company by way of return investment that are
not so interested in the measure of soundless of he company. This issue is even more pronounced when
criticism that are normally levied against accounting measure of profitability
many criticisms regarding the measure of profitability in the accounting
sense. E.g. profit measurement by
accountant depends on the assumption and policies used. Hence the ability of he company to pay
dividend can be stated to measure the sounded and profitability of a
STATEMENT OF PROBLEM
Though dividend policies decision is guided by legal
framework as prescription in the company and allied matters decree (CAMD) of 1990 as to what constitute dividend
in the corporate rate earning and the method in which the dividend policies
decision can be taken.
there are many constraints inherent in
dividend policies research work reveals other factors to be considered in order
to determine and study will only concern on two opposing view or argument
associated with dividends policy decision.
arguments can be highlighted as thus:
i. IRRELEVANT ARGUMENT/ SCHOOL OF
posted that given the investment decision of the firm the dividend pay out is a
merely details that dividends policies does not affect the wealth of the
shareholders that is it is of need.
ii. RELEVANT ARGUMENT
that high tax payer prefer low dividend yield while institutional investor who
do not pay tax prefer high yield or profit
OBJECTIVE OF THE STUDY
The objective of he study include
To analyze the basic models of share valuation with a
view to answering such question as what are their simikritics and difference
what is the extent to which dividend payout affect the value of shares of
source listed companies etc.
To determine whether Education in dividend have
anything to do with the value of shares.
To show whether any of the shares valuation models
cannot with reality
STATEMENT OF THE HYPOTHESIS
An hypotheses is a statement of fact to study put forward
by a researcher as a starting point for reasoning to guide him in human
research work which may be true or false valid or otherwise if he data
collected by the research indicated that majority support the fact that is
valid it is therefore accepted otherwise it is not and hence rejected for the
purpose of this research of study the major hypothesis considered are.
in dividend payout by some listed companies has effect on the value of
in dividend payout by some listed companies has no effect on the value of
SIGNIFICANCE OF THE STUDY
The research work is intended to be of food use to anybody
involved in the process of dividend payments and receipt. For example companies management and
investor. The study by analyzing some
dividend share valuation models intention show the logic behind these modems.
There is no
doubt that some shareholders will be expecting high dividend some might be
different and source even prefer no dividend situation. In fact some attend
annual (general) meeting (ACM) in other to know the actual dividend declare for
is beneficial to the companies in the policy making such as follows.
It enhance the image the organization e.g financial
It will attract investors
Increase market shores prices
Room for expansion
It increase and enabling the sources for fund in the
will be reference sources to future researchers
SCOPE OF THE STUDY
As a result of the fact that the possibility of obtaining
internal information is very remote data analysis will be restricted to facts
obtained from listed company’s published financial statement and stock exchange
daily official lists.
looks at the patterns of some shares before dividends are declared and the
behaviour of such shares to the public and investors as a whole. This is with a view to identifying whether
shores prices respond to dividend declaration and payout.
The day in
which dividend are approved for payment by the shareholders at the annual
general meeting is assumed to be the day that such dividends are declared and
the day when dividend warrants are posted to respective shareholder is regarded
as the payout day.
LIMITATION OF STUDY
This study will concern itself with situation in the stock
market as they relate to the year 1998 1999 2001, 2002.
research work will limit itself to only principles of dividends terms and
abbreviations as they effect the scope of shoes value.
DEFINITION OF TERM
E.P.S (earning per shore) this is the profit after tax
of a company dividend by the number of shores in issued and ranking for
Profit after tax: That
is number of shores in issued and ranking for dividend
Price earning ratio:
It shows the ratio of earning to the market value of shores.
Interim dividend: This
is a dividend a company prior the end of its financial year.
Pay out ratio:
This is the proportion of total earning (after tax) that is distributed as
and Miller: There are two professors of finance who made extensive research on
dividend policy and capital structure.