IMPACTS OF DIVIDEND POLICY ON FINANCIAL PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA

Abstract This study investigated the effect of dividend policy on the financial performance of Deposit Money Banks (DMBs) in Nigeria. Specifically, the study examined the influence of dividend payout ratio (DPR), dividend yield (DY), dividend per share (DPS), and firm size (FSIZE) on Return on Assets (ROA). The study adopted a quantitative research design. Secondary data were sourced from the annual reports of listed DMBs in Nigeria for 10 years. Data were analyzed using descriptive statistics, Pearson correlation, and multiple regression analysis. The findings revealed that dividend policy practices varied significantly across banks. Correlation results showed positive relationships between DPR, DY, and ROA. However, regression results indicated that DPR (β = –0.014, p = 0.837) and DY (β = –0.182, p = 0.505) had no statistically significant effect on ROA. This implies that payout ratio and yield do not independently determine financial performance. In contrast, DPS had a positive and statistically significant effect on ROA (β = 0.048, p < 0.001), indicating it as the most influential dividend policy variable. Firm size also had a significant negative effect on ROA (β = –0.080, p = 0.009). The result supports the dividend signaling theory, suggesting that cash dividends per share serve as credible signals of financial strength. The study concluded that DPS is the key driver of financial performance among Nigerian DMBs. The study recommends that banks prioritize stable, sustainable dividend-per-share policies and address efficiency challenges associated with expansion. Keywords: Dividend Policy, Financial Performance, DMB, DPR, DY, DPS;