Effect of Cash Dividend on firm finance performance

1. By
Eng . Ahmed Aniss
Dr . Mohamed Sheta

2. What is Dividend Policy ?
 It’s the Regulations and guidelines that a
company uses to decide to make dividend
payments to shareholders
&
 Commonly defined as the distribution of
earnings (past or present) in real assets
among the shareholders of the firm in
proportion to their ownership.
 So dividend policy is a very important one
in the current business environment.

3. What’s the Firm Financial
Performance & How to measure it
?
 Financial performance is a subjective
measure of how well a firm can use assets
from its primary mode of business to
generate revenues and expand its
operations.
 It can be measured in many different ways
like revenue from operations, operating
income or cash flow from operations can be
used as well as total unit sales

4. How the Firm can expand its
operations & What’s the barrier
?
 One of the most safely ways which able
the firm to expand its operation is to use
its earnings for reinvestment
but
 The shareholders have the right to get
the earnings to maximize their wealth as
they have invested their money in the
expectation of being made better off
financially.

5. Who’s the responsible to
Decide the Percentages of
Dividend ?
So that they say :
“harder we look at the dividend picture the
more it seems like a puzzle, with pieces that
just don’t fit together.”

6. Determinants of Financial
Performance on Listed Firms
 Profitability
 cash flow
 sales growth
 market to book value

7. One of the most important
factor effecting on market to
book value
 Stability and growing in dividend Payout
Ratio policy to shareholders and the
expected investors .

8. Effect of dividend policy on
firm finance
 A study by Arnott and Asness (2003)
revealed that future earnings growth is
associated with high dividend payout.
They expected earnings growth is
fastest when current payout ratios are
high and slowest when payout ratios are
low and further stated that companies
that pay high dividends are generally
confident in their ability to provide strong
earnings growth in the future.

9. Hypothesis test :
 H1: There is significant positive relationship between
the dividend payout ratio and firm performance.
 H2: There is significant positive relationship
between the earnings per share and firm
performance.
 By ANALYTICAL MODEL :
 Correlation analysis
 Regression analysis

10. Test Result
 The estimated coefficient on dividend payout
ratio is significant, supporting hypothesis (H1)
that here is a positive significant relationship
between the dividend payout ratio and return
on equity.
 the estimated coefficient on earnings per
share is significant, supporting hypothesis (H2)
that there is a positive significant relationship
between the earnings per share and return on
equity.

12. The results of this study :
 This study found that dividend policy
had a significant positive effect on
financial performance of firms
 Therefore, firms should put in place
effective strategies to ensure a high
score on dividend stability which will
contribute to better performance in the
future