Relevance of Dividend to Profitability of Nigerian Firms

This paper established that dividend policy is relevant to firm profitability. A combination of ordinary least square and vector autoregressive (VAR) model was used in analyzing short and long run relationships between dividend policy of firms quoted in the Nigerian stock exchange and their profitability. The results show that capitalized dividend has significant positive effect on profitability in the short run, while dividend payout has significant positive effect in the long run. The paper recommends that management of firms must adopt flexible dividend policies that grant shareholders fair and equitable share of profits made in order to build and sustain investors’ confidence and trust on management. This is necessary for profitability and sustainable growth of firms.