Abstract:
This study is done in order to determine the factors which are responsible in constructing
the dividend policy of the firms. The primary objective of corporations is to maximize the
wealth of the shareholders and this objective can be achieved by formulating a sound
dividend policy. In order to do the research a thorough view of preceding work done on this
issue was conducted and after that three dependant variables were identified as the
determinants of dividend policy. For the purpose of the research the fertilizer sector of
Pakistan was chosen because this sector comprises of firms which are very much
heterogeneous as they have many differences in policies, style of business, size, different
stages of business cycle and dividends history.
The data of five years was collected from the financial statements of these firms and
statistical tests were applied on this data. The outcomes of the data were very mixed due to
the differences in the firms but the size of the firms and profitability made by firms showed
positive relationship with the payments of dividends most of the times. Growth was the
third independent variable but it showed negative relationship with the dividend payments
because companies which are in growth phase do need more funds that’s more money is
retained in business and less amount is paid in the form of dividends. On the basis of the
outcomes got in this research an industry to industry analysis‐ is recommended.
