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Farhiya Ali Adan & Job Omagwa, Kenya

There is substantial evidence on inconsistencies in paying dividends by listed firms in the Nairobi Securities Exchange have been on the upsurge since 2010. In year 2017, only two firms managed a special dividend in addition to normal dividends. Studies have found that over a third of listed firms at the NSE have not paid dividends since 2014. All further 15 companies have been reducing their dividends per share. Even though this has been attributed to profit making, reorganization of business models and a drive to expand as some of the key reasons, there has been conflicting information annually on the reasons why, with reference to successive annual reports since 2010 in spite of the ever changing market dynamics. The inconsistencies on market reports and studies done have found literally that this area should be relooked with no well-known study having been done to link firm financials to dividend payments in the recent years most notably at the firms listed in the NSE. Consequently, this study sought to fill the knowledge gap by assessing the relationship between firm financials and dividend policy of listed firms at NSE, Kenya. The specific objectives of the study were: to establish the relationship between firm size, profitability, capital base and ddebt-equity mix on dividend policy among firms listed at NSE, Kenya. This study adopted a descriptive research design. The study targeted 38 firms listed that paid dividends over the study period of 5 years. The study used secondary data covered the year 2011 to 2015. The data analysis techniques involved descriptive statistics, correlation and panel regression. Regression analysis findings indicate that firm size and dividend policy are positively and significantly related (?=4.250821, p=0.014). The stud further found that profitability and dividend policy are positively and significantly related (?= 2.157921, p=0.022). Capital base and dividend policy are positively but insignificantly related (? =2.23343, p=0.068). Regression of coefficients findings indicate that debt-equity mix and dividend policy are positively are positively and significantly related (?= 0.050463, p=0.000). Based on the findings above, the study concluded that firm size is a critical component explaining dividend policy of a firm. Larger firms are able to pay dividends largely due to their strength to pay dividends. The study also concludes that profitable firms with reliable net earnings can afford more free cas-flows and thus pay more dividends. Evidently, firm's profitability ratio is a significant determinant of the dividend payout policy. Firms with higher leverage have bigger debts and interest obligations to settle hence higher chances of paying lower dividends. Firms that rely much on debt to finance its operations pay low dividends because they are monitored by debt-holders who lowers management capability to pay dividends.

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