Representative of Trisakti School Of Management for International Conference On Finance, as presenter of my research jounal, Bali 19-20 Dec 2015 (presenting my research journal). I make research on the topic dividend payout ratio and I presented the research as well as questions and answers in the International Conference On Finance, Bali Dec. 19-20, 2015. The conference was attended by researchers and academics in finance from around the world such as William Megginson of Oklahoma University and Roni Michaely of Cornell University, the results is my research has been the international research journal IFMA (The Indonesian Financial Management Association).

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Factors Influencing Dividend Payout in Indonesia:
A Tobit Regression Analysis
Romario
Trisakti School Of Management
Kyai Tapa Street 20, Grogol, Jakarta, 11440, Indonesia
E-mail: hasugian_romario@yahoo.com
Abstract
The purpose of this paper is to determine the factors that influence the
dividend payout ratio in real estate and property firms listed in the Indonesia Stock Exchange
(IDX) during the year 2009 to 2014. Using the Tobit Regression analysis, results of this study
proves that profitability and firm size positively affected the dividend payout ratio.
Furthermore, this study proves that liquidity, financial leverage, sales growth, business risk,
and investment opportunities insignificantly related to diviend payout ratio. Results of this
study useful for investors to allocate funds optimally by considering the dividend payout ratio
in order to improve the wealth of the investors. This study can help financial managers to
make decisions related to dividend payout ratio to be paid with the aim of generating greater
profits for the owners of the firm and also for the benefit of stakeholders. This study may also
help the development of financial study as well as a reference for other researchers to study
in the future.
Keywords: Dividend payout ratio, Profitability, Liquidity, Financial leverage, Sales growth,
Business risk, Investment opportunities, Firm size, Tobit regression, Indonesia
JEL Classification: G32, G35
1. Introduction
The global financial crisis in 2008 has affected economies around the world, including
Indonesia. After the global financial crisis of 2008, the yield on money market instruments
are also likely to fall, seen from the deposit rates are low and difficult to keep up with
inflation. Data from Central Bureau of Indonesia Statistics (BPS), noted that inflation in 2014
has reached 8.36%. Investors should consider the investment alternatives that can provide a
yield above inflation, even providing optimal benefits for the investors, that is capital market.
Statistically, Indonesia Stock Exchange recorded the average rate of return (yield) of the
stock investments in Indonesia from 2009 to 2014 amounted to 16.85%. The yield is much
higher than the yield on government bonds at 7.36%, gold 4.81% and deposits 6.95%. The

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amount of yield stocks investments in Indonesia are also able to attract foreign investors to
invest in Indonesia capital market. Recorded throughout 2014, the amount of cash flow of
foreign capital has reached Rp49,70 trillion. Indonesia Stock Exchange record, after the
financial crisis of 2008 set to 2014, the total foreign investor has invested funds worth Rp
103.50 trillion in the Indonesia capital market, thus important for capital market investors to
understand the dividend payout ratio as an indicator of stock’s yield.
Dividend policy is still a topic that is debated until this day. There are two groups of
researchers who argue that very contradictory. The first group said the firms should not pay
dividend, while the second group stated that the firm should pay the dividend optimally. The
group that claimed the firm should not pay dividend ie: Miller and Modigliani (1961)
proposed M & M theory of dividend irrelevance. They stated that the value of the firm and
shareholder value does not relate to the payment of dividend in a perfect capital market.
Litzenberger and Ramaswamy (1979) also reject the dividend payment through the theory of
tax preferences, they believe that the cost of the dividend payment reduces the wealth of
investors due to tax effects. Therefore, investors prefer capital gains than dividends because it
can delay tax payment (Brennan, 1970; Elton & Gruber, 1970; Kalay, 1982; John &
Williams, 1985; Miller & Rock, 1985).
Other research groups that support the payment of dividend, consists: Gordon (1959) and
Lintner (1956) proposed the bird-in-the-hand theory in which investors prefer dividends than
capital gains, to reduce the risk. This is because the value of dividend paid today is more
definite than the capital gains in the future. As a result, the higher the value of the shares if
the value of the higher dividend paid. Bhattacharya (1979), Miller and Rock (1985), John and
Williams (1985), Ambarish et al. (1987). also argued signaling theory, they states that the
dividends is a signal (sign) to investors that the firm's management predicts a good income in
the future. If an increase in the dividends, the capital market investors assume that the firm
able to generating higher earnings than before, so investors are willing to buy shares at a high
price. This had a positive impact for the firm, likely the increase in value of the firm so that it
is easier to obtain external financing. Besides the payment of dividends is also able to prevent
corporate managers using firm’s profits to investments that do not benefit shareholders,
supporting the explanation of agency theory (Jensen and Meckling, 1976).
In addition of two groups researchers above, there is still a group of researchers who state
that the dividend payment depends on investor demand. According clientele effect (Pettit,
1977), different group (Clientele) shareholders will have different preferences on dividend
policy. Baker and Wurgler (2004) suggested catering theory of dividends, the firm pays the
dividends to investors depend on dividend premium, as measured by differences in market-
to-book (M / B) ratio among firms that pay dividends to firms that do not pay dividends.
This study will analyze the factors that affect the dividend payout ratio by using
profitability, liquidity, financial leverage, sales growth, business risk, investment
opportunities and firm size as independent variables. The object of this study is real estate
and property firms listed in the Indonesia Stock Exchange (IDX) during 2009-2014, because:

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First, real estate and property firms are also part of the real estate, property and building
construction sector in IDX. Data from IDX indicate that real estate and property sector is
experiencing the highest increase in EPS compared to other sectors, it’s 8.67 times in 2009
compared to 2008, as well as consistent EPS increased since the global financial crisis of
2008. This indicates that the real estate and property firms is very worthy of investment
options in the capital market.
Table 1. EPS Based on IDX Sector 2008-2014
unit: in Rupiah
NO Sector 2008 2009 2010 2011 2012 2013 2014
1 AGRICULTURE 262 296 419 194 169 89 144
2 MINING 280 208 286 484 258 99 66
3
BASIC INDUSTRY AND
CHEMICALS 201 238 212 243 220 92 172
4 MISCELLANEOUS INDUSTRY -768 -52 191 728 -125 149 96
5
CONSUMER GOODS
INDUSTRY 4,753 5,845 4,552 5,679 5,377 11,117 5,392
6
PROPERTY, REAL ESTATE AND
BUILDING CONSTRUCTION 3 26 50 64 83 113 326
7
INFRASTRUCTURE, UTILITIES
& TRANSPORTATION 74 11 40 91 144 62 117
8 FINANCE 68 85 129 118 162 134 131
9
TRADE, SERVICES &
INVESTMENT 38 61 87 87 159 62 205
Source: Indonesia Stock Exchange
Second, real estate and property is a very promising field and supports the development in
Indonesia. Based on data from the Central Bureau of Statistics (BPS), Indonesia has a great
potential which is a population of 237.641.326 inhabitants in 2010 and is projected to have
252.164.800 inhabitants in 2014. However, data from the Central Bureau of Statistics during
2009-2014 showed that a decline in the ratio of home ownership, that is 79.36% in 2009,
78% in 2010, 78.77% in 2011, 80.18% in 2012, 79.47% in 2013 and 78.97% in 2014. Based
this informations, we know that more households and residents who have not home
ownership, if not immediately addressed the backlog (the imbalance between the need to
availability of home) will be even greater.
2.1 Literature Review
There are various theories that discussed the dividend policy. Fabozzi (2010) mentions 5
theories, that is: The dividend irrelevance theory , the “bird in the hand” theory, theory of tax-
preference, the signaling theory, and the agency explanation. Besides, Pettit (1977) proposed
clientele effect theory, Baker and Wurgler (2004) also suggests catering theory of dividend.

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2.1.1. M & M theory of dividend irrelevance
Dividend irrelevance theory is Miller and Modigliani’s theory that in a perfect market, the
firm’s value is only determined by the earning power and risk of its assests (investments) and
that the manner in which firm splits its earnings stream between dividends and internally
retained (and reinvested) funds are not affect the firm’s value (Gitman, 2015).
Some have argued that the dividend policy has no effect on the firm's stock price as well
as to the cost of capital. If the dividend policy does not have significant influence, then it is
not relevant. According to Modigliani and Miller (1961) states that: "The value of a company
is not determined by the size of the dividend payout ratio (DPR), but is determined by the net
income before taxes (EBIT) and the company's risk class".
So according to the Modigliani and Miller (1961), the dividend is not relevant. Modigliani
and Miller's statement was based on several assumptions like: perfect capital market where
all investors are rational, no new share issuance costs if the firm issuing new shares, no tax,
the firm's investment policy has not changed. While in practice: perfect capital markets are
difficult to find, a new stock issuance costs must exist, there must be a tax, the firm's
investment policy is unlikely unchanged.
2.1.2. Theory of bird-in-the-hand
Theory of bird in the hand is the belief, in support of dividend relevance theory, that
investors see current dividends as less risky than future dividends or capital gains (Gitman,
2015).
The theory states that investors prefer dividends because cash in hand is more valuable
than wealth in other forms. Consequently the firm's stock price, according to Gordon (1959)
and Lintner (1956) stated that the firm's cost of capital will be largely determined by the
amount of the dividends. Thus, the higher the dividend, the higher the value of the firm. The
assumption that firms do not care how many dividend payment.
But Modigliani and Miller (1961) considered that Gordon (1959) and Lintner (1956)
argument’s is a mistake. Modigliani and Miller used the term "the bird in the hand fallacy"
which he said is ultimately investors will reinvest dividends received on the same firm or
firms that have almost the same risk.
2.1.3. Theory of tax-preference
The theory put forward by Litzenberger and Ramaswamy (1979) that if dividends are
taxed at a higher amount than the tax on capital gains, investors want the dividends are
distributed in small quantities with a purpose to maximizing the value of the company.
The tax preference theory claims that investors prefer lower payout firms for tax reasons
,long-term capital gains allow the investor to delay tax payment until they decide to sell the
stock. Because of time value of money effects, tax paid immediately has a higher cost than
the same tax paid in the future (Brennan, 1970; Elton and Gruber, 1970; Litzenberger and

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Ramaswamy, 1979; Litzenberger and Ramaswamy, 1982; Kalay, 1982; John and Williams,
1985; Miller and Rock, 1985; Ambarish et al., 1987).
2.1.4. Signaling theory
Dividend signaling theory was first proposed by Bhattacharya (1979). Dividend signaling
theory has been an underlying assumption that announcement about changes of cash
dividends have the information content of stock price reaction. This theory explains that the
information about cash dividends, beneficial to the investor as a signal of the firm's prospects
for the future. This assumption is due to the presence of asymmetric information between
managers and investors, so investors using dividend policy as a signal about the firm's
prospects. Increase in the dividends will be considered as a positive signal, which means the
firm has good prospects, giving to positive share price reaction. Conversely, if there is a
decrease of dividends will be considered as a negative signal, which means the firm has a
prospect that is not so good, giving to negative stock price reaction.
2.1.5. The agency explanation
The relation between the owners and the managers of a company is an agency
relationship: The owners are the principals and the managers are the agents. Management is
charged with acting in the best interests of the owners. Nevertheless, there are possibilities for
conflicts between the interests of the two (Fabozzi, 2010). Easterbrook (1984), Jensen (1986)
state that if the firm pays a dividends, funds are paid out to shareholders. If the firm needs
additional funds, it could be raised by issuing new securities; in this event, shareholders
wishing to reinvest the funds received as dividends in the firm could buy these new securities.
One view of the role of dividends is that the payment of dividends therefore reduces the cash
flow in the hands of management, reducing the possibility that managers will invest funds in
unprofitable investment opportunities.
2.1.6. Clientele effect
According to Gitman (2015), clientele effect is the argument that different payout policies
attract different types of investors but still do not change the value of the firm.
According to the clientele effect (Pettit, 1977), the different group (clientele) of
shareholders will have different preferences on dividend policy. Group of shareholders who
need income now more like a dividend payout ratio (DPR) is high. Instead a group of
shareholders who are not so need the money today is more pleased if the firms hold the
majority of the firm's profits. If most of the firm’s shareholders have high dividend demand,
the firm considers paying high dividends. Inversely, if most of firm’s shareholders have low
demand for dividends, the firm considers keeping profits as retained earnings rather than
paying high dividends.
2.1.7. Catering theory of dividend
Baker and Wurgler (2004) argued that according to the catering theory of dividends, the
firm pays the dividends to investors depend on dividend premium, as measured by

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differences in market-to-book (M / B) ratio among firms that pay dividends with firms that do
not pay dividends , When the dividend premium increases (because investors prefer
dividends have paid a high price for the firm's stock), the firm tends to pay dividends. On the
other hand, firms tend not to pay dividends when the dividend premium down.
2.2 Definition of the Variables
2.2.1 Dividend Payout Ratio
Dividend payout ratio indicates the percentage of each dollar earned that is distributed to
the owner in the form of cash. It is calculated by dividing the firm’s cash dividend per share
by its earning per share (Gitman, 2015).
2.2.2 Profitability
Definition of profitability according to Gitman (2015), is the relationship between the
revenues and costs generated by the using of firm’s asset both current and fixed in productive
activities. Firms can increase their profitability by increasing its revenues or decreasing its
costs or both. He et al. (2012) wrote that firms with higher profitability imply that they have
more free cash flows. Some firms pay dividends either for their own consumption or for
building a good reputation through dividends payments and thus maintaining the
competitiveness in financial markets. Their profitability are found a positive relation.
Thanatawee (2011) examined the effect of profitability on the dividend payout on the
Stock Exchange of Thailand and found that profitability had a positive effect. Afza and Mirza
(2011) also found that profitability have positive effect to dividend payout. In addition Kania
and Bacon (2005) found that profitability negatively affect the dividend payout. Anil and
Kapoor (2008), Komrattanapanya and Suntrauk (2013) found no effect of profitability on the
dividend payout ratio. In this paper, their research can be summarized as follows:
Ha1: There is a significant effect of profitability to dividend payout ratio.
2.2.3 Liquidity
Gitman (2015) states that liquidity is a firm’s ability to satisfy its short-term obligations as
they come due. Jensen (1986) stated that the managers may benefit themselves with cash
surplus; therefore, a firm should pay dividends to reduce free cash flow and protect the
managers to spend more cash in unavailing projects. Paying dividends is then a mechanism to
control the agency problem.
Thanatawee (2011) found a positive effect of liquidity on the dividend payout on the Stock
Exchange of Thailand. Ramli and Arfan (2011) also found a positive effect of liquidity on the
dividend payout in the Indonesia Stock Exchange. Meanwhile, Rehman and Takumi (2012)
found a negative effect of liquidity on the dividend payout at the Karachi Stock Exchange.
Besides Kim and Gu (2009), Gill et al. (2010), Al-Kuwari (2009); Yiadom and Agyei (2011),
Al-Shubiri (2011), Komrattanapanya and Suntrauk (2013) found that liquidity does not affect
the dividend payout. In this paper, their research can be summarized as follows:

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Ha2: There is a significant effect of liquidity to dividend payout ratio.
2.2.4 Financial Leverage
According to Gitman (2015), financial leverage is the use of fixed financial costs to
magnify the effects of changes in earnings before interest and taxes on the firm’s earnings per
share. According to Yan and Kam (2012). dividend decreases actually increase the debts of a
firm. For firms, they need to maintain their internal cash flow to pay their fixed financial
charges rather than distribute the cash to shareholders because failures to meet this obligation
may lead the firm into risk. For those who have high financial leverage, they have a tendency
to reduce the transaction costs by lowing payout ratios.
Alisinaei and Habibi (2012) found a positive effect of financial leverage on dividend
payout in the Tehran Stock Exchange. Fumey and Doku (2013) also found a positive effect of
financial leverage on dividend payout. Rozeff (1982) and Jensen (1986), Komrattanapanya
and Suntrauk (2013) found that financial leverage negatively affect the dividend payout.
While Hadiwidjaja (2007), Alzomaia and Al-Khadhiri (2013), Zhang and Jia (2014) found
that financial leverage does not affect the dividend payout ratio. In this paper, their research
can be summarized as follows:
Ha3: There is a significant effect of financial leverage to dividend payout ratio.
2.2.5 Sales Growth
Brigham and Houston (2011) states that the sales growth is an increase in sales from year
to year or from time to time. A company whose sales are relatively stable can safely take on
debt in larger quantities and issued burden remains higher than the company whose sales are
not stable”. Rozeff (1982) found that a growth firm tries to retain internal finance and limit its
dividend payment due to the costs of using external borrowings that are commonly higher
than costs of using internal funds. A firm with high growth then requires a large amount of
financing to invest in its projects, so they retain their income and not to pay dividends.
Kania and Bacon (2005) found a positive effect of sales growth to the dividend payout.
When firms achieve high sales, the firm will strive to satisfy investors through dividends.
Fumey and Doku (2013), Komrattanapanya and Suntrauk (2013) found a negative effect of
sales growth to the dividend payout. While Alzomaia and Al-Khadhiri (2013) found no effect
of sales growth to the dividend payout in Saudi Arabia. Mardiyati et al. (2014) also found no
effect of sales growth to the dividend payout in the Indonesia Stock Exchange. In this paper,
their research can be summarized as follows:
Ha4: There is a significant effect of sales growth to dividend payout ratio.
2.2.6 Business Risk
Gitman (2015) states that business risk is the risk to the firm of being unable to cover
operating cost. Business risk may negatively impact on the operations or profitability of a
given firm. When current profits and expected future profits are uncertain, a firm confronts to

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the business risk. Hence, a firm is impossible to pay high dividend as profits increase (Jensen,
Solberg, & Zorn, 1992).
Fumey and Doku (2013) in Ghana and Musiega et al. (2013) in Nairobi Securities
Exchange, Kenya find a positive effect of business risk to the dividend payout. While Rozeff
(1982) and Al-Shubiri (2011) found a negative effect of business risk to the dividend payout.
However the results of Kim and Gu, (2009), Al-Kuwari (2009) Yiadom and Agyei (2011),
Komrattanapanya and Suntrauk (2013) showed no effect of business risk to the dividend
payout ratio. In this paper, their research can be summarized as follows:
Ha5: There is a significant effect of business risk to dividend payout ratio.
2.2.7 Investment Opportunities
Investment Opportunity is a corporate value that depends on expenditures set management
in the future, which is currently the investment options that are expected to generate huge
returns (Gaver and Gaver, 1993). According to the pecking order hypothesis proposed by
Myers and Majluf (1984), those who have high growth and investment opportunities are
likely to demand more internal funds to finance their future investments, and thus they are
tend to pay few or no dividends.
Afza and Mirza (2011) in Pakistan and Musiega et al. (2013) in Nairobi Securities
Exchange, Kenya find a positive effect of investment opportunities to the dividend payout.
Thanatawee (2011), Alisinaei and Habibi (2012), Rehman and Takumi (2012),
Komrattanapanya and Suntrauk (2013) found a negative effect of investment opportunities to
the dividend payout ratio. While Zhang and Jia (2014), Anil and Kapoor (2008), Gill et al.
(2010) found no effect of investment opportunities to the dividend payout ratio. In this paper,
their research can be summarized as follows:
Ha6: There is a significant effect of investment opportunities to dividend payout ratio.
2.2.8 Firm Size
Size refers to how large or small a firm is measures by firm’s market value. Company size
has affected company’s risk and net adjusted return. If the company size is small then the risk
will be higher than the company with large size because company with lage size has diverse
its risk into different investments (Reilly and Brown, 2012). Normally a larger size of a firm
implies that it is in a mature stage. These kind of large firms are more likely to pay dividends
because it‘s easier for them to generate ample amounts of cash and they have faded good
opportunities for their investment (Fama & French, 2002). Thanatawee (2011), Musiega et al.
(2013), Komrattanapanya and Suntrauk (2013) found a positive effect of firm size to the
dividend payout ratio. Fumey and Doku (2013), Zhang and Jia (2014) found a negative effect
of firm size to the dividend payout. While Afza and Mirza (2011) found no effect of firm size
on the dividend payout ratio. In this paper, their research can be summarized as follows:
Ha7: There is a significant effect of firm size to dividend payout ratio.

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2.3 Research Model
Figure 1. Research Model
3. Research Methodology
3.1 Data Collection
The sample in this study is 246 samples, consists 41 real estate and property firms listed in
the Indonesia Stock Exchange (IDX) during 2009-2014. All data was obtained from the
Indonesia Stock Exchange, Fact Book, and the Indonesia Capital Market Directory.
3.2 Tobit Regression Model
Dividend Payout Ratio has unique characteristics, which only has two possible values;
zero value (not pay dividend) and a positive value (pay dividend). Therefore, it is necessary
to use Tobit regression analysis (Gujarati,2004: 616). Statistically, Tobit models can be
shown as follows:
Yi = β1 + β2 Xi + μi if RHS > 0
Yi = 0 otherwise

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where RHS = right-hand side or the right side that is not worth 0, Gujarati (2004, 616). Tobit
regression model above can be applied to the regression model used in this study as follows.
DIV = a + b1PROF + b2LIQ + b3DTE + b4GROW + b5RISK + b6MTB + b7SIZE + е
if RHS > 0
DIV = 0 otherwise
Description:
DIV = Dividend Payout Ratio; a = the intercept of the regression equation; b1, b2, b3, b4,
b5, b6, b7 = linear regression coefficient for each independent variable; PROF = Profitability;
LIQ = Liquidity; DTE = Financial leverage; GROW = Sales growth; RISK = Business risk;
MTB = Investment opportunities; SIZE = Firm size; e = Error regression
The following Table 2 presents the measurements of variables. After all of data compiled
into the panel data, then all of data is processed using EViews 7.
Table 2. Measurements of Variables
Symbols Description Measurement
DIV Dividend payout ratio (in
percentage)
Cash dividends of Common Stock / Income
before Extraordinary Items – Minority Interest –
Cash Dividends of Preferred Stock) * 100
PROF Return on Assets Net Income / Average of the beginning balance
and ending balance) * 100
LIQ Cash flow per share (Net Income + Depreciation & Amortization +
Other Noncash Adjustments + Changes in Non-
cash Working Capital) / Average total number of
shares outstanding
DTE Debt to Equity ratio (Total Liabilities/Total Common Equity)*100
GROW Change in sales per year ((Net sales for the current period / Net sales for
the last period) -1)*100
RISK Variability in return on asset The standard deviation of the firm’s return on
assets in time t and t-1
MTB Ratio of stock price to book
value per share
Price to Book Ratio = Last Price / Book Value
Per Share
SIZE The natural logarithm of
current market capitalization
The natural logarithm of current market
capitalization time t
4. Results
Tobit regression results are shown in Table 3. Profitability (PROF) has a positive and
significant impact on the dividend payout at 5% confidence level. A firm with high
profitability able to utilize its assets to generate greater profits than firms with low
profitability. Therefore, firms with high profitability prefers to distribute dividend to satisfy
investors. Further, investors willing to buy shares at high prices, thereby increasing the firm's
value,then firm easier to obtain external funding. These results are consistent with research

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He et al. (2012), Thanatawee (2011), Afza and Mirza (2011) who found the positive effect of
profitability to dividend payout ratio.
Table 3. Results of Regression Tobit
Variables Coefficients Prob.
C -549.605500 0.000100
PROF 3.426762 0.036100*
LIQ 0.036982 0.409800
DTE 0.004155 0.954200
GROW -0.044058 0.678000
RISK -2.418080 0.055500
MTB -0.103343 0.826200
SIZE 17.395970 0.000300*
Log Likelihood function= -727.1062; N= 246
Note: *significant at 5% confidence level.
Firm Size (SIZE) also has a positive and significant impact on the dividend payout at 5%
confidence level. Firms with a large size is more like to pay dividends than small firms,
because large firms want to providing a positive signal about the condition of firm to
investors. While smaller firms tend not to pay dividends, because the profits were used to
new investments to improve the firm's growth. These results are consistent with research
Fama and French (2002), Thanatawee (2011), Musiega et al. (2013), Komrattanapanya and
Suntrauk (2013) who found a positive effect of firm size on the dividend payout ratio.
In addition, Table 3 also shows that liquidity (LIQ), financial leverage (DTE), sales
growth (GROW), business risk (RISK), and investment opportunities (MTB) are not
statistically significant at the 5% confidence level. Firms with high level of liquidity tend to
pay dividends aim to reducing agency problems. Firms with high level of financial leverage,
sales growth, business risk and investment opportunities tends to retaining their cash for debt
settlement and/or new investment, rather than paying dividends. However, some firms with
high financial leverage also tends to pay dividends. That means profits derived from the use
of debt is greater than the cost of debt, so the residual profits are distributed to the investors
as dividend.
5. Conclusion
The aim of this study was to find the factors that affect dividend payout ratio in real estate
and property firms in Indonesia Stock Exchange. This study empirically proved that
profitability and firm size significantly affect the dividend payout ratio. Results of this study
useful for investors to make the right decision in stock investment and the factors which
affect the dividend payout ratio. Recommended to investors who expect a high dividends to
invest in firms that have high profitability, as the firm is able to optimize its assets to generate
earnings. The earnings will be distributed to investors in the form of dividend.

12. 12
This study also suggests investors who expect high dividends to invest in large firms.
Firms with large size more likely to pay dividend than firms with small size. Large firms
prefer to pay dividend, because they want to create positive signal to the investors about their
performance. In addition, financial managers want to signal that their firms are performing
outstanding and better than market average, so that the market prices of stocks will increase,
resulting in an increase in firms’ value. Moreover, it can increase opportunities to easily
access financial supports from financial institutions.
Moreover, results of this research beneficial for financial managers. Financial managers
can use this results as reference to make decision about dividend payout ratio, financial
budgeting, and strategic planning. They would be able to decide whether firms should keep
retained earnings for future projects, for debt settlement, and/or for dividend payout.
Nonetheless, this study give empirically evidence that liquidity, financial leverage, sales
growth, business risk, and investment opportunities insignificantly related to dividend payout
decision. Limitations of this study is only uses one industrial sector (real estate and property),
so that the conclusions of this study might just fit to the real estate and property firms. That
happens because of different business cycles in each sectors, so that very possible the
influence of independent variables to the dividend payout ratio is different in each sector. For
further study, the authors will expand the research object by grouping all firms in IDX based
IDX sectors. Thus we able to know about characteristics of dividend payout ratio in each
sectors. Further study also uses research’s period longer than six years, and thus more able to
explain the overall variables studied.
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