Abstract
M.Com. (Financial Management)
This study seeks to develop a better understanding of the determinants of cash dividend payout in South Africa. Latest trends in the Sub-Saharan region indicate that the agency cost and free cashflow theories best explain the dividend policies in the region. The objective of this study is to test the applicability of these theories for a South African context together with an examination of the possible impact of the macroeconomic factors, taxation and profitability on the dividend policies. The focus is on firms in the consumer goods sector and the financial sector on the Johannesburg Stock Exchange over a period from 1988 to 2016 to capture the long run relationships.
Using Panel regression, the results suggest that there is a significant difference in the determinants of dividend payout between the two sectors. The agency cost and free cashflow theories explain the dividend payout for the financial sector where leverage, dividend tax, previous dividend and current profitability explain the dividend decision for the consumer goods sector. GDP per capita is a common determinant for both sectors though in inverse relationships.
The results mirror those found in other developing economies and the study has contributed to the growing body of knowledge on the determinants of cash dividend payout in South Africa.