Effect of Cash Flow on the Shareholders Dividend Payout: Evidence from Listed Manufacturing Firms in Nigeria

Chineke Abraham Chidi and Ernest Chike Nwoh
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Chineke Abraham Chidi: Department of Accountancy, Enugu State University of Science and Technology, Enugu, Nigeria.
Ernest Chike Nwoh: Department of Accountancy, Enugu State University of Science and Technology, Enugu, Nigeria.

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Abstract: This study examined the effect of cash flow on the dividend payout ratio of listed manufacturing firms in Nigeria, with specific objectives to assess how operating, investing, and Financing Cash Flows, cash ratio, and net cash flow yield influence dividend payout ratio. The study adopted an ex-post facto research design, as it relied on historical financial data that could not be manipulated by the researcher. The population comprised twenty (20) manufacturing firms listed on the Nigerian Exchange Group as of 2024, from which fifteen (15) firms were purposively selected based on data availability between 2015 and 2024. Data were obtained from the published annual reports and accounts of the selected firms. Hypotheses were tested using the Panel Estimated Generalized Least Squares (EGLS) regression model. The findings revealed that: Operating Cash Flow has a positive and significant effect on dividend payout ratio of manufacturing firms in Nigeria; Investing Cash Flow has a positive and significant effect on dividend payout ratio of manufacturing firms in Nigeria; Financing Cash Flow has a negative and significant effect on dividend payout ratio of manufacturing firms in Nigeria; cash ratio has a negative and significant effect on dividend payout ratio of manufacturing firms in Nigeria; net cash flow yield has a positive and significant effect on dividend payout ratio of manufacturing firms in Nigeria. Thus, the nexus between cash flow management and dividend payout is systematic rather than incidental, reinforcing the notion that dividend policy in Nigeria's manufacturing sector is deeply rooted in cash flow realities rather than purely accounting profits. With the negative and significant effect of cash ratio on dividend payout ratio, corporate treasurers and chief financial officers should ensure optimal liquidity management, maintaining adequate but not excessive cash holdings so that surplus funds are not unnecessarily tied down in idle cash balances but are used in ways that support shareholder value through consistent dividend payments.

Date: 2026-03-14
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Published in Journal of Economics and Trade, 2026, 11 (1), pp.253-271

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