Dividend Policy and Price Earnings Ratio of Listed Industrial Goods Manufacturing Companies in Nigeria.

Abstract

Nigerian manufacturing firms find themselves besieged with challenges such as high production costs, poor infrastructure, and limited access to finance, which limit profitability. This study aimed to examine the effect of dividend policy (DP) on the price/earnings (PER) ratio of listed industrial goods manufacturing firms in Nigeria. The study adopted an ex-post facto research design. The population comprised 13 industrial goods manufacturing companies, listed on the Nigerian Exchange Group. The consensus sampling technique was used to select 13 industrial goods companies in Nigeria. Secondary data extracted from the annual financial reports of the companies for the period 2011 –2023 were analyzed using a panel regression model. The dividend policy metrics' effects on the PER were found to be mixed in the empirical data. The findings showed that the link between dividend payout ratio and the PER was positive and significant (β = 9.089442; p = 0.028). On the other hand, dividend cover showed an insignificant negative effect on PER (β = -0.4550704; p = 0.944). Conversely, the PER was negatively and significantly affected by dividend yield (β = -97.0509; p = 0.035), while the dividend per share had an insignificant negative influence on PER (β = -0.4439733; p = 0.791). In conclusion, dividend policy has a significant effect on the price-earnings ratio of quoted industrial goods manufacturing companies in Nigeria. The study suggests that corporate management should implement a dividend policy strategy that strikes a balance between shareholder returns and the need to reinvest in order to maintain long-term competitiveness and sustainable development.