EFFECT OF DIVIDEND POLICY ON FIRMS’ EARNING IN NIGERIA (A CASE STUDY OF UNITED BANK FOR AFRICA)


EFFECT OF DIVIDEND POLICY ON FIRMS’ EARNING IN NIGERIA (A CASE STUDY OF UNITED BANK FOR AFRICA)   

ABSTRACT

This research work presents the Dividend Policy on Firms’ Earning in Nigeria. Dividend being the amount of net profit available to the ordinary shareholders. Management is faced daily as to what decision to take on profit generated from the business. Should this profit be retained in business for future expansion or paid out as dividend to shareholders. There is a need to strike a balance on this for the general benefits of the investors. The dividend earnings of firm is the confidence of the investors on his investment decision. There are two basic broad categories of investors: Passive and Active. Passive investor believes that the market is perfect and will therefore result in adequate reward while the Active investors believe he can beat the market because the market is not perfect. He believes he has access to better information over other investors. He incurs huge transaction cost and his profit/loss could be significant. Risk and time are two major variables with direct relationship to returns. The higher the risk and the longer the time, the higher the return. Equity holders are risk bearer who will expect higher returns for a given level of investment. The relationship between Dividend Policy and Firms’ Earning has been proved to be perfectly correlated. Investors expect stable dividend for income. There could also be preference for capital appreciation by way of bonus issue. In all, there is the need for management to handle all decisions relating to dividend policy with absolute diligent for corresponding effect on the firms’ earning which is the measurement of stakeholders’ wealth. 

TABLE OF CONTENT

Title Page

Certification

Dedication

Acknowledgement

Abstract 

Table of Content 

CHAPTER ONE: INTRODUCTION

1. Background to the Study

1. Purpose of the Study 

1. Scope of eth Study 

1. Statement of the Problem

1. Significance of the Study 

1. Definition of Terms

1. Research Question

CHAPTER TWO: LITERATURE

1. Overview of Divided Policy

1. Forms of Dividends

1. Types of Dividend Policy 

1. Determinants of Divined Policy 

1. Dividend Debate 

1. Risk Return Analaysis 

1. The mean Variance Analysis 

1. Summary 

CHAPTER THREE: RESEARCH METHODOLOGY

1. Introduction

1. Research Design 

1. Data Collection Method 

1. Sampling Plan 

1. Sampling method 

1. Description of research Instrument

1. Administration of Research Instrument 

1. Analytical Procedure 

1. Limitation to the Methodology

1. Coding Procedure 

CHAPTER FOUR: PROFILE

1. Historical Background of Case Study 

1. Achievements 

1. Management Team 

1. Vision

1. Mission 

CHAPTER FIVE: DATA PRESENTATION AND ANALYSIS

1. Introduction

1. Data Presentation 

1. Analysis of Respondent Bio-Data 

1. Analysis of Individual Statement 

1. Testing of hypothesis CHAPTER SIX: SUMMARY, CONCLUSION AND RECOMMENDATIONS

1. Summary of Major Findings

1. Conclusion 

1. Recommendation

References 

Bibliography

Appendix 

CHAPTER ONE

INTRODUCTION

1. BACKGROUND TO THE STUDY

Dividend according to Nwude (2003) “is the share of the company’s legally available profits divided among the  shareholders and received by the  shareholders in cash (where cash is paid out) or stock (where stock is paid) or both in other forms of paper claims to wealth”. Dividend is the reward for investing in the company. 

Dividend plays an important role in determining the value of share in the capital market by investors. Payment of dividends satisfies the residual shareholders’ desires for some return on their investment and increases their confidence in the future of the company in which they invested their money. In addition, every investor by policy is paid dividend at the end of every financial year, net earnings remaining after paying of creditors, tax authorities, expenses, preferred stockholders are paid out as dividends “or shared between retained earnings and cash dividends” or stock dividends. This enhances the firms share value in “capital market as the demand for the stock of such good dividend paying company will increase thereby pushing the share price upwards. This is called demand push share price increase. On the other hand, retained profits can also be reinvested in the company for meeting the expansion needs, profit targets and growth records. 

Therefore, an effective dividend policy is extremely important for company in its desire to maximize the wealth of its stockholders.

Dividend policy, according to Pandey (2003) “is the guiding principle for determining the portion of a company’s net profit after taxes to be paid out to the residual shareholders as dividend during a particular financial year. The purpose of a dividend policy should be to maximize shareholders’ wealth, which is dependent on both current dividend and capital gains”. 

What happens to the value of the firm as dividend is increased, holding everything else (capital budget and borrowing) constant. Thus, it is a trade-off between a retained earnings on one hand, and distributing cash or securities on the other as follows:

Maintenance of Stable Monetary Amount; the guiding policy is that firms will maintain and pay out to residual shareholders a stable amount in naira value as dividend in spite of the company’s performance during any year. Once that fixed amount is paid out from the earnings available to residual owners, any excess is retained in the business for other investment opportunities. Note: If the fixed amount is greater than the earnings available to residual owners, the deficit could be met from the revenue reserve. The implication is that if a company’s earnings per share is N5 during a year and has the policy of paying N5 divided per share every year, nothing will be left for investment purpose even though there is an investment opportunity existing or showcase. It encourages investors to pay high price for the company stock. 

Maintenance of Stable Payout Ratio;  This is a policy in which the firm decides to pay out a fixed percentage of its net profit as dividends to residual owners. The implication is that it often leads to fluctuation in her dividend policy. Payment of Extra Dividends Over And Above the Fixed Ratio or Fixed Amount; this policy is an addendum to the maintenance of stable monetary amount and maintenance of stable payment ratio. If the firms make excess of the net profit, the balance can be used to improve or increase the dividend amount payable under fixed rate or used to invest or as a plough-back to the business. 

Residual Dividend Policy; The decision here is that is to pay out whatever is left over after taken care of the capital requirements of the firms to residual owners as dividend. Therefore, effect of dividend policy on firms earnings in Nigeria will be elaborated upon in subsequent of the project work. 

1. PURPOSE OF THE STUDY

Effects of dividend policy on firms’ earning in Nigeria can be achieved by the selection and adoption of various dividend policy in Nigeria that will lead to improvement in shares and market value of the firms: 

1. Find the relationship between dividend policy and the determinant factors of dividend policy. 

1. The effect of dividend policy on practicing firms.

1. To make recommendation based on the findings. 

1. SCOPE OF THE STUDY

This project work is centered on the effect of dividend policy on firms’ earning in Nigeria. The various determinant of dividend policy, forms of dividend, the dividend debate, objectives, mathematics of dividend policy, dividend payment procedure, cash dividend, stock dividend, stock repurchase, stock split etc. will be treated in detail in the subsequent chapters of this project work. The project work tend to touch every organization in Nigeria that adhere strictly to dividend policy but due to financial and time constraints, it narrow the scope of study to United Nigeria Bank for Africa Plc (UBA) and other interview will be carried out in some other manufacturing organization. 

1. STATEMENT OF THE PROBLEM

In order to look into the financial management objective of shareholder wealth maximization, organization pursue investment, financing and decision which will increase value to the owners of the business. This additional value depends on the dividend policies that is reflected on the market value of the firms’ stock. For long-term owner value to be maximized, a dividend policy which is consistent must be pursued. Hence, commitment towards achieving a dominant position in industry as well as retraining investors confidence has been an on-going struggle from management of forms. 

Therefore, striking a balance in linkage between dividend policy and firms’ earning is one instrument in achieving the goal of financial management. 

1. SIGNIFICANCE OF THE STUDY

1. To determine the division of earnings between payment to shareholders and retained earnings. 

1. The firm has to balance between the growth of the company and the distribution to the shareholders. 

1. To strike a balance between the long-term financing decision and the wealth maximization. 

1. To ascertain the market price of share. 

1. Retained earnings helps the firm to concentrate on the growth, expansion and the modernization of the firm. 

1. To know the financial flow, capital structure of the firm, corporate liquidity, stock prices, growth of the company and the investors. 

1. DEFINITION OF TERMS

This involves a brief description of the various terms associated with dividend policy on firms’ earning in Nigeria. The following includes terms that will be employed in the subsequent chapter of this project. 

1. Dividend: This is the distribution of value to shareholders. It is the reward for investing in an organization or for putting ones’ asset into an investment. 

1. Policy: This has to do with the guiding rules and regulation, principles and mandate upon which management implore to ensure effectiveness in organization control. It has to do with the strict compliance in operation. 

1. Stock Dividend: It is the payment of dividend in the form of issue of additional shares to residual owners of the firm. 

1. Cash Dividend: It is the payment of dividend in cash. 

1. Stock Split: It means the division of existing stock price by two and the multiplication of such stock by two. 

1. Stock Re-Purchase: It is the acquisition of the company’s outstanding shares by the company itself for warehousing in the stock trading. 

1. Firms: A firm is a business working for the actualization of goals. An individual can be a firm. 

1. Company: A company has to do with group of firms engaging in business to realize primarily profit. 

1. Earnings: It is the reward that goes to an investor (profit). 

1. Budget: It is a propose plan quantified in monetary terms showing income and expenditure to be incurred in the future. 

1. Finance: This has to do with the asset of a company. It could be in the form liquid or fixed (fixed or current). 

1. Value: It is a firms’ worth is a business. 

1. Exchange: It is the value one give up for wealth acquisition.

1. RESEARCH QUESTIONS

The research questions for this study are as follows:

1. Are there relationship between dividend and firms’ earning in Nigeria? 

1. Has dividend distribution been adequately addressed in the United Bank for Africa Nigeria Limited? 

1. Should dividend policies and firms’ earnings of UBA be redesigned? 

1. Are they any relationship between dividend and earnings by firm and the management objective of shareholders’ wealth maximization?

.


TYPE IN YOUR TOPIC AND CLICK SEARCH.






RESEARCHWAP.COM

Researchwap.com is an online repository for free project topics and research materials, articles and custom writing of research works. We’re an online resource centre that provides a vast database for students to access numerous research project topics and materials. Researchwap.com guides and assist Postgraduate, Undergraduate and Final Year Students with well researched and quality project topics, topic ideas, research guides and project materials. We’re reliable and trustworthy, and we really understand what is called “time factor”, that is why we’ve simplified the process so that students can get their research projects ready on time. Our platform provides more educational services, such as hiring a writer, research analysis, and software for computer science research and we also seriously adhere to a timely delivery.

TESTIMONIES FROM OUR CLIENTS


Please feel free to carefully review some written and captured responses from our satisfied clients.

  • "Exceptionally outstanding. Highly recommend for all who wish to have effective and excellent project defence. Easily Accessable, Affordable, Effective and effective."

    Debby Henry George, Massachusetts Institute of Technology (MIT), Cambridge, USA.
  • "I saw this website on facebook page and I did not even bother since I was in a hurry to complete my project. But I am totally amazed that when I visited the website and saw the topic I was looking for and I decided to give a try and now I have received it within an hour after ordering the material. Am grateful guys!"

    Hilary Yusuf, United States International University Africa, Nairobi, Kenya.
  • "Researchwap.com is a website I recommend to all student and researchers within and outside the country. The web owners are doing great job and I appreciate them for that. Once again, thank you very much "researchwap.com" and God bless you and your business! ."

    Debby Henry George, Massachusetts Institute of Technology (MIT), Cambridge, USA.
  • "I love what you guys are doing, your material guided me well through my research. Thank you for helping me achieve academic success."

    Sampson, University of Nigeria, Nsukka.
  • "researchwap.com is God-sent! I got good grades in my seminar and project with the help of your service, thank you soooooo much."

    Cynthia, Akwa Ibom State University .
  • "Great User Experience, Nice flows and Superb functionalities.The app is indeed a great tech innovation for greasing the wheels of final year, research and other pedagogical related project works. A trial would definitely convince you."

    Lamilare Valentine, Kwame Nkrumah University, Kumasi, Ghana.
  • "Sorry, it was in my spam folder all along, I should have looked it up properly first. Please keep up the good work, your team is quite commited. Am grateful...I will certainly refer my friends too."

    Elizabeth, Obafemi Awolowo University
  • "Am happy the defense went well, thanks to your articles. I may not be able to express how grateful I am for all your assistance, but on my honour, I owe you guys a good number of referrals. Thank you once again."

    Ali Olanrewaju, Lagos State University.
  • "My Dear Researchwap, initially I never believed one can actually do honest business transactions with Nigerians online until i stumbled into your website. You have broken a new legacy of record as far as am concerned. Keep up the good work!"

    Willie Ekereobong, University of Port Harcourt.
  • "WOW, SO IT'S TRUE??!! I can't believe I got this quality work for just 3k...I thought it was scam ooo. I wouldn't mind if it goes for over 5k, its worth it. Thank you!"

    Theressa, Igbinedion University.
  • "I did not see my project topic on your website so I decided to call your customer care number, the attention I got was epic! I got help from the beginning to the end of my project in just 3 days, they even taught me how to defend my project and I got a 'B' at the end. Thank you so much researchwap.com, infact, I owe my graduating well today to you guys...."

    Joseph, Abia state Polytechnic.
  • "My friend told me about ResearchWap website, I doubted her until I saw her receive her full project in less than 15 miniutes, I tried mine too and got it same, right now, am telling everyone in my school about researchwap.com, no one has to suffer any more writing their project. Thank you for making life easy for me and my fellow students... Keep up the good work"

    Christiana, Landmark University .
  • "I wish I knew you guys when I wrote my first degree project, it took so much time and effort then. Now, with just a click of a button, I got my complete project in less than 15 minutes. You guys are too amazing!."

    Musa, Federal University of Technology Minna
  • "I was scared at first when I saw your website but I decided to risk my last 3k and surprisingly I got my complete project in my email box instantly. This is so nice!!!."

    Ali Obafemi, Ibrahim Badamasi Babangida University, Niger State.
  • To contribute to our success story, send us a feedback or please kindly call 2348037664978.
    Then your comment and contact will be published here also with your consent.

    Thank you for choosing researchwap.com.