THE RELATIONSHIP BETWEEN DIVIDEND PAYOUT AND SHARE PRICE PERFORMANCE

Abstract

This study sought to examine the relationship between dividend payout and share price performance in Tanzanian Commercial Banks. The specific objectives of this study were to determine the relationship between dividend yield, cash dividend payout ratio and stock dividends with share price performance. This study employed dividend irrelevance theory and signaling theory. The study adopts a positivism research philosophy and a quantitative approach, utilizing a causal research design. The research focuses on commercial banks listed on the Dar es Salaam Stock Exchange (DSE), with a target population of seven banks selected through purposive sampling. Data is collected through secondary sources via documentary reviews. For data analysis, both descriptive and inferential statistics are employed using STATA software. Descriptive statistics include mean and strand deviation, while inferential statistics involve correlation analysis and Hausman test regression. The study unveiled a moderate positive correlation between dividend yield and share price performance. Similarly, the findings of this study revealed a moderate positive between the cash dividend payout ratio and share price performance. Also this study found a weak negative between stock dividends and share price performance. This study recommends that Tanzanian commercial banks focus on optimizing dividend yields to enhance share price performance, as a positive relationship between dividend yield and share price has been observed. It also suggests that banks carefully manage their cash dividend payout ratios, as a higher payout ratio could signal financial stability and positively impact share prices. Additionally, the study advises reconsidering the reliance on stock dividends due to the weak negative correlation with share price performance. Future research could examine the influence of technological advancements, such as mobile banking, fintech, and blockchain, on dividend policy and payout decisions in Tanzanian commercial banks.