DETERMINANTS OF DIVIDEND PAYOUT OF OIL & GAS SECTOR OF PAKISTAN

Abstract

This study analyzes the factors that have a major impact on dividend payout of Oil and Gas sector of Pakistan by taking the sample of five listed companies on Karachi Stock Exchange. The data gathered is from year 2007 till 2011. Although there is a list of factors that may have an impact on dividend payout but in this study Six factors are chosen i.e. Growth Opportunities, Financial Leverage, Firm Size, Liquidity, Taxes and Profitability. The research is based on both Primary and the Secondary data. In primary data interviews were conducted from the officials of PSO and OGDCL. In secondary data, annual reports of the companies were examined and later on the data collected from the annual reports was analyzed by running regression using SPSS software. The results shows that Financial Leverage and Profitability have significant impact on dividend payout but the relationship is negative and positive respectively. Growth Opportunities and Firm Size both have neutral and insignificant relationship with dividend payout. However, Taxes and Liquidity results shows that relationship is positive but impact is very low. The research also reveals that capital expenditure plays a vital role in deciding dividend specifically in oil & gas sector. Study also tells about the sentiments of Pakistani people, people here prefer dividends rather than capital gain and companies of oil and gas sector are able to gain the trust of public because of consistency in dividend policy that is why stocks of oil & gas sectors are considered blue chip.