Factors influencing dividend payout in Tanzania: a panel data regression analysis the case study of selected firms listed at the Dar es Salaam stock exchange

The purpose of this study is to determine the factors that influenced the dividend payout ratio of all firms listed in the Stock Exchange of Tanzania (DSE) during the period 2006 to 2010, a period of financial crunch. Based on the literature, the researcher decided to test the relationship between the dividend payout ratio and five company-selected factors: firms’ profitability, liquidity, financial leverage, firm size and sector dummies. The study uses a five-year panel data of seven companies listed at DSE during the period 2006-2010. Using both Random Effect Regression and a Random Effect Tobit regression analysis, results indicate that two of the company-selected factors had an impact on the companies’ dividend payout ratios. The dividend payout ratio had a significant relationship to firm’s profitability and liquidity. Specifically results suggest that the higher the profitability of firms the higher the dividend paid, while the higher the liquidity the lower the dividend paid. However, it is found that financial leverage, firm size and sector dummy are insignificantly related to dividend payout ratio. The study recommends that corporate entities listed at DSE should conduct frequent training to investors on making right decisions regarding stock investment to boost their confidence, help them make sound financial decisions with regard to which companies to invest their money. Furthermore, listed companies should implement a dividend policy based on their current financial settings.