Factors Effecting Dividend Pay-out: Agriculture Sector in Pakistan

Abstract

Agriculture has been a major source of the country’s food security and a stimulant to off farm employment but agricultural production is on decline. Most firms in the agricultural sector have not lived to their expectations and have led to shareholder apathy thereby contributing to the decline of the rural economy due essentially to unstable and low dividend payout. Profitability has always been considered as a primary indicator of dividend payout ratio. There are numerous other factors other than profitability that also affect dividend decisions of an organization namely growth opportunity, Liquidity, Firm Size. Available literature suggests that dividend payout is positively related to profits, liquidity and it has inverse relationship with Firm size, growth and Leverage. This research is an attempt to analyze the determinants of dividend payout of Pakistan Agricultural sector. This thesis also focused on identifying whether various factors available as per literature influence dividend payout ratio in Agricultural sector in Pakistan in existing scenario or not. Statistical techniques of regression were used to explore the relationship between key variables. Thus, the main theme of the study was to identify the various factors that influence the dividend payout policy decisions of Agricultural firms in Pakistan listed on Pakistan Stock Exchange. The study covered the period from 2012-2017. The research design was quantitative in nature and data analysis was carried out using the Statistical Package for Social Scientists (SPSS) version 17.0. The results show positive relationships between dividend payout and profitability and firm size. The results also show negative associations between dividend payout and firm growth opportunities. These results are consistent with the prediction by many authors.