The Journal of Accounting and Management, Vol 9, No 2 (2019)

Abstract

Abstract The study investigates the relationship between dividend payout ratio and the financial performance of Top40 JSE (Johannesburg Stock Exchange) based on the market capitalization on dividend payment. The several empirical studies have been conducted both developed and developing countries, however to date there is no universal agreement especially in developing countries like South Africa on the relationship between dividend payout and financial performance despite few empirical evidence studies conducted in South Africa. The study therefore analyses the relationship between the two variables dividend payout ratio (DPR) dependent variable and financial performance (independent variable) which is measured by net profit margins (NPM), liquidity (LIQ), leverage (LEV), growth (GRO) and firm size (SIZE). Through panel data Top40 companies on the JSE from 2010-2015 were purposively selected for analysis. The fixed effect model was applied as recommended by Hausman test. In order to eliminate the problem of collinearity, autocorrelation and heterokedasticity the study employed the generalized least squares (GLS). The regression results found negative relationship between dividend payout ratio of Top40 firms with profitability and liquidity, and a positive relationship were found on dividend payout with net profit margins (NPM), leverage (LEV), growth (GRO), and firm size (SIZE).