Abstract:
The aim of this study is to examine the relationship between dividend policies and share prices of
non financial firms listed at Nairobi Securities Exchange (NSE). The general objective of the
study was to examine the relationship between dividend policies (dividend payout ratio, dividend
growth rate and control variable i.e. Earnings per share) and the share price of non financial
firms listed at NSE. The dataset consisted volume weighted average price as dependent variables
and dividend payout ratio, dividend growth rate and earnings per share as independent variables.
A non probability sampling was used. Purposive sampling was used to select the 20 desired non
financial firms listed at Nairobi Securities Exchange. The study used secondary panel data
contained in the annual reports and financial statements of listed non financial firms. The data
was extracted from the Nairobi Securities Exchange websites for period 2010 to 2015. The study
employed descriptive design. The study applied panel data models (Fixed effects). Multiple
linear regression analysis was used to establish the relationship. The findings showed that there
was statistically insignificant positive relationship between dividend payout ratio and share price
of non financial firms listed at NSE. Dividend growth rate had positive significant relationship
with share price. Earnings per share had negative and significant relationship with the share
price. The study recommended that management of listed firms should conduct a research on
different dividend policies to identify the ones that would maximize the value of a firm.
