Dividends payout policy: a study of 3 Malaysian public listed companies

This study examines dividend policy of the 3 Malaysian Public Listed Companies. Panel data covers 3 companies that listed in bursa Malaysia. The data is taken for the five year period (2006-2010). Dividend policy, vastly followed by the companies, was tested with the earning per share, operating cash flow, debt to equity ratio and market capitalization as an independent variable. At first, the descriptive statistics for our entire variables were calculated.From the results, we found that payout ratios in a given industries vary significantly across time. The results reveal that the Malaysian public Listed Companies’ dividend actions are sensitive to the changes in earnings. Probabilities of dividend increases, decreases and omissions are high, respectively, with earnings increases, decreases and losses. This causes volatility in dividend payments. Further, we also found that dividend payments policy positively and significantly influenced by cash flow. The higher the availability of cash flow, will lead to the higher dividend payments. Although, surprisingly, dividend had a significantly positive relationship with financial leverage. In the view of Easterbrook (1984), increasing dividends raises the probability that additional capital will have to be raised externally on a periodic basis. Lastly, dividend payments also had a positive relationship with the size of the company.