An analysis of determinants of dividend policy: a case study of listed companies quoted in Dar es Salaam Stock Exchange (DSE) in Tanzania

Each company has its own dividend policy and they differ across companies. Numerous previous empirical studies or researches have focused much on developed markets or economies such as the USA, UK, Canada, Australia and relatively less literature on developing and emerging economies yet leaving unsolved puzzle to the company whether to pay or not to pay dividend. The current study aims to provide insights on the determinants or factors influencing dividend policy decision as well as to analyse the dividend policy of the listed companies in the Dar es Salaam Stock Exchange in Tanzania. A distinct procedure was followed for the fulfilment of the aim of this study which involved both qualitative and quantitative methods. Questionnaires were distributed to 6 companies, completed, analysed and evaluated. The main purpose of questionnaires was on the identification of factors influencing dividend policy decision in the Tanzanian Stock Market. Lintner’s model was used to analyse the dividend policies of listed companies quoted in DSE and majority of companies showed inconsistent with the model, thus indicating no relationship between DPS and payout ratio of firms in the DSE. In addition regression model in line with hypothesis was used and once again it showed dividend yield have no effect on share price returns of companies listed in the Tanzanian Stocks by rejecting null hypothesis. The response from questionnaires indicated that the most influential factors in developing dividend policy are expected future earnings, current and future investment opportunities as well as liquidity issues. Furthermore recommendation are made as which actions the quoted companies have to take in order to come out with strong and stable dividend policies for their companies.