AN EMPIRICAL ANALYSIS OF FREE CASH FLOW ON DIVIDEND POLICY OF LISTED CONSUMER GOODS FIRMS IN NIGERIA

Abstract

The paper determines the impact of free cash flow on the dividend policy of consumer goods companies in Nigeria. The data was collected from annual reports and accounts of the sampled companies for a period of ten years from 2009 to 2020. Data were analyzed through descriptive statistics to provide summary statistics for the variables and correlation analysis was also carried out using the Pearson correlation technique for the correlation between the dependent and explanatory variables. Multiple regression techniques were used to analyze the data using STATA software version 16.00. The study found that free cash flow and earnings per share have positive effects on the dividend policy while a negative significant relationship was found between leverage and dividend policy of listed consumer goods companies Nigeria. Companies in which a high proportion of shares are held by managers are more reluctant in paying a higher dividend. Hence, the study recommends that companies in the consumer goods sector should endeavour to improve the level of free cash and profitability while reducing the level of leverage thereby implementing a higher dividend payout policy.