Firm Size, Profitability, and Dividend Payout among the Listed Companies n Uganda’s Stock Exchange.
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Date
2025-09-15
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Makerere University Business School
Abstract
Dividend payout is a crucial factor in motivating shareholders to invest in a company and serves as an indicator of financial market performance. Despite shareholders’ continuous investment in companies, the returns in the form of dividends have often not met expectations, as evidenced by the low dividend payouts ranging from 0% to 8% among listed companies on the Uganda Stock Exchange (USE). This study aimed to explore the causal relationship between firm size and profitability on dividend payout among listed companies on the USE. Specifically, the study sought to: (i) examine the effect of firm size on dividend payout, (ii) assess the effect of profitability on dividend payout, and (iii) investigate the combined effect of firm size and profitability on dividend payout.
The study uses quantitative secondary data from 16 listed companies on the USE over the period 2013-2022, representing 176 company year observations. Financial statements were sourced from secondary data on the USE. Panel data was employed for analysis.
The findings reveal a significant positive effect between profitability and dividends paid, as well as between firm size and dividends paid. Larger firms, with more assets, are shown to pay higher dividends. Additionally, the study indicates a combined positive and significant effect of both profitability and firm size on dividend payout among listed companies in Uganda.
To enhance dividend payouts among listed companies on the Uganda Stock Exchange, firms should focus on expanding their asset base and improving profitability. Companies performing well financially should consider revising their dividend payout ratio to reflect their ability to distribute higher dividends, thereby rewarding shareholders. Companies should also consider revising their dividend policies to align with these factors and improve transparency and communication with shareholders to manage expectations. Additionally, regulators might explore incentives to encourage higher dividend payouts, while further research could investigate other influencing factors to provide a more comprehensive understanding of dividend dynamics in emerging markets.
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This is a master's thesis.
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Citation
Nakamya, M. (2025) Firm Size, Profitability, and Dividend Payout among the Listed Companies n Uganda’s Stock Exchange. (Unpublished master’s dissertation). Makerere University Business School, Kampala, Uganda.