Beyond the Balance Sheet: Decoding the Profitability-Dividend Relationships in the Corporate Sector

Abstract

Dividends are the part of profits that should be distributed among the shareholders for their capital contribution. It is one of the costs of capital on the part of the company as it is given as a reward to the owners. The investor's major aim is to receive maximum return on capital to maximise wealth. Dividend policy differs from organisation to organisation based on various factors, mainly its future visions. Dividend policy influences the value of the firm. This study attempts to bring to light the relationship between dividend payout and profitability. This study is mainly based on the information available from all the segments listed in NIFTY50. The share prices and financial variables are obtained from the NSE website, the prowess database of CMIE and the Official websites of companies. The major variables used are Earnings Per Share and Dividend Per Share, which were analysed using Pearson’s Correlation. The analysis showed a significant relationship between the dividend per share(DPS) and the earnings per share of companies. When the earnings per share increases, the dividend per share also increases. This study covers different sectors such as Services, Consumer Goods, Financial Services, Automobile, Energy, Telecom, Pharma, Metals, Cement & Cement Products, IT, Construction, Fertilisers & Pesticides, Media & Entertainment. The findings would bring portrayal to corporate managers, investors, share market dealers, agencies, financial institutions and financial consultants.