INFLUENCE OF CASH FLOW STRUCTURE ON DIVIDEND PAYOUT AMONG DEPOSIT TAKING SACCOS IN KENYA

Abstract

Purpose:This purpose of this study was to determine the influence of cash flow structure on dividend payout among deposit taking saccos in kenya. The study was motivated by inconsistency in the ability of Saccos to live up to their promise of paying dividends to members. There are variabilities in dividend payout based on different sacco sectors. Saccos pay dividends on a different percentage from the previous year.  Many of them pay dividends from unforeseen profits.

Methodology: The study used secondary data that was accumulated using secondary data

collection sheet from first quarter of 2005 to fourth quarter of 2018. A correlational research design was used. The main theoretical frameworks included the dividend irrelevant theory and agency theory.

Findings: During  the panel period, Saccos failed to improve their ability to generate resources from equity yet, they sustained a high dividend payout. To maintain their dividend payout, the DT-saccos borrowed funds to pay dividends. Clustering of these saccos by size revealed that small and medium sized ones were the most at risk due to high leverage. Cash flow structure had a positive effect on dividend payout. During panel period, Cash flow available to saccos grew by 8% while dividend payout grew by 5%.. Cash flow structure was highest in large scale Saccos and lowest in small scale ones. 

Implications:Small saccos have higher dividend payout compared to large ones. Indeed, small saccos use dividends as a business strategy to retain and attract new members, thereby augment their capital. The findings from this study are useful to the board of directors and management team of companies in deciding an appropriate dividend policy for the company. The results are also useful to shareholders in making investment decisions. The study extends empirical evidence on dividend policy determinants which are currently reported to be inconclusive.