Dividend Policy and Performance of Listed Deposit Money Banks in Nigeria

Abstract

This study examined the effect of dividend policy on the performance of listed deposit money banks in Nigeria, with the main objective of determining how dividend decisions influence financial performance. Specifically, the study assessed the influence of dividend payout ratio, dividend per share, and dividend yield on return on assets of the selected banks. An ex-post facto research design was adopted, with a population of thirteen deposit money banks listed on the Nigerian Exchange Group as of 31st December 2024, from which a sample of eleven banks was selected. Secondary data were collected from the audited annual reports of the sampled banks covering the period 2015 to 2024. The hypotheses were tested using ordinary least squares (OLS) regression. It was found that: dividend payout ratio has a negative but non-significant effect on return on asset of listed deposit money banks in Nigeria (β = −0.000034, p = 0.8718); dividend per share has a positive and significant effect on return on asset of listed deposit money banks in Nigeria (β = 0.032686, p = 0.0000); dividend yield has a negative and significant effect on return on asset of listed deposit money banks in Nigeria (β = −0.367500, p = 0.0039). In conclusion, dividend related decisions are integral to the overall efficiency and profitability of banks, influencing how resources are allocated and utilized within these institutions. The study recommends that Bank management teams should critically evaluate the proportion of earnings distributed as dividends relative to retained earnings. By carefully balancing payout ratios with reinvestment opportunities, management can ensure that distributing profits does not inadvertently constrain the bank’s capacity to generate future returns, even if the immediate effect on ROA appears minimal.