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This study revels that choice of dividend policy is a financial management decision that deserves a great care to strike and maintain a balance between:-

1.      Paying out earnings (or part) to the stockholder.

2.      Retaining it for reinvestments by the firm.

Ordinarily, the objectives above represent two different interest groups viz. The investor clamorous for high dividend pay-out, the investment (the firm) otherwise, higher dividend pay-out, means higher cash flow to the investors, which is good, but a lower future growth of the firm which on the other hand.

            Therefore, an optional dividend policy is required to reconcile these opposing forces and maximize the price of the stock. The impact of dividend policy in market price of shares was discovered. Higher dividend payout attracts more investors and when there is rush for a company’s stock, the price will move up uientele effect. This is a common view  of different authorities as shown by the literature review of this research.

The objective of this study is to investigate what effect a dividend policy adopted by a firm has on the market value of share of that company. The statistical analysis of this work was the computation of the share price in the market for the company with the dividend piggens in the first place and with the earning figures in the second place.

It was discovered using correlation coefficient that a strong positive relationship exists between the company’s dividend policy and her share. The hypothesis formulated was tested using analysis data. It should that dividend policy has impact on the firm’s share price. It is therefore uncommercial end that dividend pay-out be given a deserved consideration since it has a positive influence on the share price.

In conclusion, dividend policy has impacts on market value of shares.



1.0              Introduction                                                               

1.1              Preamble                                                                                            

1.2              Statement of Problem                                                

1.3              Purpose of the Study                                                 

1.4              Significant of the Study                                                        

1.5              Research Hypothesis                                      

1.6              Scope and Limitation of the Study                                       

1.7              Concise Historical Background of the Study                                                

1.8              Definition of Terms                                                               

1.9              References.                                                                                                    


2.0                 Literature Review                                                                 

2.1              Theories on Dividend Policy                                     

2.2              Union bank of Nigeria                                                           

2.3              Role of dividend policy in banking                                       

2.4              Criticisms of the Theories                                                      



3.0              Research Methodology And Design                                                 

3.1              Research Population and Sample Size                                               

3.2              Methodology Statistical Analysis                              

3.3              Ratio analysis                                                                         

3.4              Graphical analysis                                                                  


4.0              Data Presentation And Analysis                                

4.1              Presentation of Data                                                  

4.2              Analysis                                                                                             

4.3              Testing of Hypothesis                                                                        

4.4              Interpretation of Results.                                                                   



5.0              Summary And Conclusions Of Findings                               

5.1              Discussion of findings                                                                                   

5.2              Conclusion                                                                                         

5.3              Recommendations                                                                 



This project research will reveals the choice of dividend policy and its impact on share price valuation. The study of dividend policy is a financial management decision that deserves a great cave to strait and maintains a balance between: (I) paying out earnings (or part) to the stockholders and (ii) retaining it for reinvestment by the firm. In the work of this project research we shall see the impact of dividend policy of market price of shares and the objectives of dividend policy.

            This project research will also look into the problems of dividend policy, the purpose, the significance, the scope and limitations, the role it plays in the society and labour market ordinarily; the objectives above represent two different interest groups viz: the investor clamorous for high dividend pay-out, the investment (the firm) wishes otherwise, in this research work we shall know the mean of higher dividend pay-out and low dividend pay0out or lower future growth of the firm.

            The objective of this research is to investigate what effect a dividend policy adopted by a firm has on market value of share of company, the statistical analysis of this project research will compute the share prices in the market for the company with the dividend figures in the second place.

            Conclusion, this research work will discover using correlation coefficient that a strong positive relationship between the company’s dividend policy and her share.


1.0                                                              INTRODUCTION

The topic “dividend policy, its impact on share prices valuation” is a study into the challenge faces, paced by financial manager of a firm. Dividend policy is concerned within the allocation of earnings between “dividend pay-out and retained part of the earnings. As we know that a policy of paying out large chunk of the earnings to the share holders will impress them and attract more investors in the firm, we should not be ignorant of the effect of not retaining enough part of the earnings for future financing of the one firms project 98 this effects the growth of the firm. Share price of stock is one of the major indicators of how well a company is fairing. A Company is rated high if its shares have a high market value but otherwise when it has a low market value. This study is aimed at establishing what effect a choice of dividend policy will have on the market price of the same company’s shares.

1.1       PREAMBLE

The choice of dividend policy to be adopted by a company is a decision based on mature experience and a careful weighing of many intertwining factors by the financial manager for instance there are varieties of consideration and influence and dividend. Pay-out policy like, what amount of the your profit is to be retained for financing favoured projects in a near future, the interest of the shareholders which demands a high  rate of dividend, legal requirements, a desire to maintain dividend stability etc. it is when a balanced argument on the above factor is resolved that the financial manager chooses to adopt stable pay-out policy, residual dividend policy, or stock split as may be favoured.

It is a complex decision given that the mode so far developed to provide mathematical solution which do not provide for all the relevant variables. Dividend once declared its usual paid in cash but in alternative, stock, bonds notes, property could be given. Shareholders of a company are particularly interested in the dividend policy since the basic relationship they have with company is evidence by the number of shareholder and a favourable policy encourages increase in the number of shareholders.

The number at which these share go in the market is another important aspect of this study, does the price of share have a direct or inverse relationship with the dividend policy of the company? This is the main focus of this study.


The problem in this study can be stated by answering questions like; what relationship does the company’s dividend policy has with the market price of the share? Is dividend policy of a company of determine or coursing a change in the company’s share price in market? It is very unfortunate that some of our financial managers cannot vividly answer the above questions hence it stated as a problem in this research work.

Though in every area of life, one might not have answer to very problem but in this area; the influence of dividend policy or the market price of share is crucial hence need be mastered by all financial managers and interest groups. A good understanding of this relationship will not only help the management adopt best suited dividend policy but will as well improve the ever needed harmony between the shareholders and the company’s directors or whose  heads the blames of meager dividend pay-out fall.


The issue of dividend policy and share price valuation has been a subject of considerable controversy. A lot has already been put down on this, hence it is not the purpose of this work to judge any proceeding view or approve a particular opinion.

The purpose of this research is critically analyzed the basis on which these earlier opinions were formed and the very foundation of decision taken by the earlier proponed of such views. Prominent among are MODIGILLANI, MILLER and MYRON who argued extensively on “dividend irrelevance” and “dividend relevance” respectively and a compromise between the two. In the course of this study their theories on this will be critically buttressed and the relationship (if any) that exist between dividend policy and share price valuation put forward. The purpose of this study is further to purpose that the market price of shares has a direct relationship with dividend policy adopted by same company.



It is important that company’s financial manager should have a firm grap of tools of financial management at his disposal. There is not and should not be room for uncertainty. An understanding of this area of management is particularly useful to any financial manager, knowing the true relationship between share price and his dividend policy will influence his control over share price and on the other hand, if it is established that no relationship exists, then each can be managed independently. these no matter the outcome of this study, it is of great essence that the manager gets enlightened and most importantly put it into action. The study will also be invaluable to potential investors, stock brokes, business entities and society and large.


It is evidence that the knowledge of the  relationship that exist between share price and dividend policy is still a mirage to most investors finance managers, and other interest groups and such in proper attention is paid to this concept therefore this research project is geared towards bringing the line-light reasonable facts about the true relationship that exist between share price and dividend policy.

Consequently, for this work our hypothesis would be as follows:

Ho:                  Dividend does not have a direct impact on the price shares.

Ho:                  Dividend has a direct impact on the price shares.

Ho:                  earning does not have the same effect of share price as dividends for the same year.


Union Bank of Nigeria Plc. as it is now known has though the century metaphases from various stages to attain a veritable ceboseus of Nigeria banking industry.

Established in 1917 as a bank of the colonial bank. The bank was opened in February that year principally to service international trade of the companies and assists the colonial government. In 1925, the bank was renamed Barclays Bank (Dominion Colonial And Overseas) in 1954. In 1969 it changed its name again to Barclays Bank of Nigeria limited in compliance to the banking decree enacted them which made it mandatory for bank like other foreign business operating in the country, to register in Nigeria.

As a result of the reduction in Barclays Bank’s shareholding in 1979 to 20 percent the name of the bank was changed to Union Bank of Nigeria Limited to reflect the new ownership event public as Union Bank of Nigeria Plc. following the peileral government disengagement of interest in the bank, the branch network grew from 207 in April 1987 to 267 as at date.

In addition a representative of the bank was opened Johannesbury, South Africa late 1995 to complement the successful operation of the London branch. Profit after tax stood at N2.345 billion against 102.15 million in 2002 and 2000 respectively.

The bank earnings per share increased from, 96 kobo to 142 kobo in 2002. While the banks deposit base amounted to N85.241 billion as against N8.06 billion in 2000, total assets of the bank has from 9 billion in 2000 to N97,675 billion in September 2002.

1.7               DEFINITION OF TERMS

Dividend: - This is part of total profit made in a year by the company that has been set aside for distribution to the stockholders.

Dividend Policy: - This is accepted gaied company has chosen for declaration and payment of dividend taking into account factors like retained earnings, the firms capital structure requirement and legal constraints.

Share: - This is the smallest unit of capital that entitles the holder to a voting right, and share of dividend.

Share price: - This is the money value of a share in the capital market. It can be priced at par, discount or within a premium.

Shareholders: - These are investors who have brought the shares of a company. The holders of ordinary shares in an individual company are known as owners of that company.

Financial Manager­ : - The term refers to anybody who is responsible for any significant corporate  investment decision, or inflow – outflow analysis.

Retained Earnings: - This is part of the declared net profit in a year by an organization that has been kept back in the business, re-invested to be used in financing favoured projects by the company.

Market Price per Share: - This is current price value of a share as determined by effect of demand and supply and this is strictly monitored by the Nigerian stock exchange.

Dividend per Share: - This ratio of dividend declared to number of ordinary share outstanding that is for every Naira invested, that which is received inform of returns.  

Earning per share: - The ratio of net income to the number of ordinary share. In other words how much is a share contributing towards the income to be company.

Cost of Capital: - This means the rate of return on investment at which the price of the firm’s common stock will retain unchanged.

Script Dividend: - This is dividend in noted of the particular company. The note usually is interest.


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