UNRAVELING DIVIDEND PAYOUTS: A COMPREHENSIVE ANALYSIS OF CASH FLOW AND EARNINGS APPROACHES IN THE LISTED MANUFACTURING COMPANIES

Ghulam Abbas; Shahid Rafiq; Maria Gul

Ghulam Abbas Assistant Professor, Government College University Faisalabad, Layyah Campus, Pakistan
Shahid Rafiq Campus Director, The Virtual University of Pakistan, PVC-PBHK01, Punjab, Pakistan
Maria Gul Department of Business Administration. University of Mianwali, Punjab, Pakistan

Keywords: Dividend Payout Decisions, Profitability, Earning Per Share, Pakistan Stock & Free Cash Flow

Abstract

This study presents a comprehensive analysis of dividend payouts in the banking sector, with specific focus on cash flow and earnings approaches. Study examines and tests the determinant variables of dividend payouts using the Ordinary Least Squares (OLS) Regression method. Data for this analysis is collected from the audited financial reports of 50 manufacturing companies listed on Pakistan Stock Exchange during the five-year period from 2017 to 2021. Study's results reveal that firms tend to exhibit higher dividend payouts when they project high profitability growth, indicating a correlation between profitability and dividend payments. However, study did not find a significant effect of earnings per share on dividend per share, despite the positive impact of profitability on dividend payout. On the other hand, cash flow per share demonstrated positive and significant influence on dividend per share. These findings offer valuable insights for the investors and decision-makers, providing them with useful information for making investment choices. The analysis allows for an examination of the factors that affect dividend decisions. This research expands the understanding of how cash flow and earnings influence dividend payouts and enhances the theoretical foundation of dividend policy in context of listed manufacturing companies.