Determinants of Dividend Payout Ratios: Evidence from United States

Amarjit Gill*,1, Nahum Biger2 and Rajendra Tibrewala3

1
College of Business Administration, TUI University, CA 90630, USA
2
Academic Center Carmel, Shaar Palmer 4, Haifa, 33031, Israel
3
School of Management, New York Institute of Technology, Old Westbury, NY 11568, USA

Abstract: The paper seeks to extend Amidu and Abor [1] and Anil and Kapoor [2] findings regarding the determinants of
dividend payout ratios by examining the same for the American service and manufacturing firms. We find that for the
entire sample the dividend payout ratio is the function of profit margin, sales growth, debt-to-equity ratio, and tax. For
firms in the Services industry the dividend payout ratio is the function of profit margin, sales growth, and debt-to-equity
ratio. For manufacturing firms we find that dividend payout ratio is the function of profit margin, tax, and market-to-book
ratio. We also found that the results are different when the dividend payout ratio is defined as the ratio between the cash
dividend that the after-tax cash flow, not the after tax earnings of the companies.
Keywords: Dividends, determinants, finance and accounting, United States.
INTRODUCTION decision makers. In addition, there has been emerging
consensus that there is no single explanation of dividend
Dividend payout has been a subject of debate in financial
payments.
literature. Academicians and researchers have developed
many theoretical models describing the factors that managers There are many reasons as to why companies should pay
should consider when making dividend policy decisions. The or not to pay dividends. For example, the dividend payout is
dividend policy, in the context of this study, means the important for investors because i) dividends provide
payout policy that managers follow in deciding the size and certainty about the company’s financial well-being, ii)
pattern of cash distribution to shareholders over time. In their dividends are attractive for investors looking to secure
seminal paper, Miller and Modigliani [3] argue that given current income, and iii) dividends help maintain market price
perfect capital markets, the dividend decision does not affect of the share. Companies that have a long-standing history of
the firm value and is, therefore, irrelevant. Most financial stable dividend payouts would be negatively affected by
practitioners and many academics greeted to this conclusion lowering or omitting dividend distributions. These
with surprise because the conventional wisdom at the time companies would be positively affected by increasing
suggested that a properly managed dividend policy had an dividend payouts or making additional payouts of the same
impact on share prices and shareholders’ wealth. dividends. Furthermore, companies without a dividend
history are generally viewed favorably when they declare
Company's income can be invested in operating assets,
new dividends.
used to acquire securities, used to retire debt, and/or
distributed to shareholders in the form of cash dividends. Since Miller and Modigliani’s [3] study, researchers have
Issues that arise if a company decides to distribute its income relaxed the assumption of perfect capital markets and offered
to shareholders include the proportion of the after tax income theories about how dividend affects the firm value and how
would be distributed to shareholders; whether the managers should formulate dividend policy decisions. Over
distribution should be as cash dividends, or the cash be time, the number of factors identified in the literature as
passed on to shareholders by buying back some shares; and being important to be considered in making dividend
how stable the distribution should be. In the well known decisions increased substantially [2]. Thus, extensive studies
classical paper Black [4] argues that "the harder we look at have been done to find out various factors affecting dividend
the dividends picture, the more it seems like a puzzle, with payout ratio of a firm.
pieces that just do not fit together." Since the publication of A variety of variables that might potentially be associated
Black's paper, the amount of theoretical and empirical or ‘responsible’ for the dividend payout in the manufacturing
research on dividend policy has increased dramatically. firms can be found in the literature. In this study, the
Bernstein [5], and Aivazian and Booth [6] revisited the selection of explanatory variables is based on alternative
dividend puzzle and found that some important questions theories related to dividend payout and previous variables
remained unanswered. Thus setting corporate dividend that were studied in reported empirical work. The choice is
policy remains controversial and involves judgment by sometimes limited, however, due to lack of relevant data. As
a result, the final set of proxy variables includes nine factors:
profitability, cash flow, corporate tax, sales growth, market-
*Address correspondence to this author at the College of Business
Administration, TUI University, CA 90630, USA; Tel: 604-985-8736; to-book value ratio, debt-to-equity ratio, dividend payout
Fax: 714-816-0367; E-mail: [email protected]

1874-9151/10 2010 Bentham Open

ratios (standard dividend payout ratio and adjusted dividend Cash Flow
payout ratio) of the firm, and industry.
The cash flow position of a firm is an important
Previous studies conducted by different authors [1, 2] did determinant of dividend payouts. A poor liquidity position
not test the impact of depreciation on the dividend payout means less generous dividend due to shortage of cash. Alli et
ratios. The earnings that appear in the denominator of the al. [13] argues that dividend payments depend more on cash
dividend payout ratios are affected by the reported flows, which reflect the company's ability to pay dividends,
accounting depreciation. than on current earnings, which are less heavily influenced
Based on the different nature of service and by accounting practices. They claim that current earnings do
manufacturing industries, the results related to dividend not really reflect the firm's ability to pay dividends. Amidu
payout ratios are expected to be different. For example, and Abor [1] found a positive relationship between cash flow
investment in machinery and equipment is almost non- and dividend payout ratios. Anil and Kapoor [2] also indicate
existent in the service industry [7]. that cash flow is an important determinant of dividend
payout ratio.
Service sector is a more human intensive sector and do
not require huge capital asset base like manufacturing Tax
companies for their operations. The major asset of this sector Tax-adjusted models presume that investors require and
is manpower. Therefore the funds required for recruitment secure higher expected returns on shares of dividend-paying
and retention of manpower is comparatively less than funds stocks. The consequence of tax-adjusted theory is the
required for purchasing capital assets [2]. So these firms can division of investors into dividend tax clientele. Modigliani
easily release funds for payment of dividends. Thus, it can be [14] argues that the clientele effect is responsible for the
concluded that service firms have high liquidity and it is an alterations in portfolio composition. Masulis and Trueman's
important determinant of dividend payout ratio. Since the [15] model predicts that investors with differing tax
profitability of the companies is also high so even if there is liabilities will not be uniform in their ideal firm dividend
year to year variability in the earnings of the firms, they can policy. They conclude that as tax liability increases
easily pay huge dividends. (decreases), the preference for dividend payment also
The depreciation allowance, however, is higher in the increases (decreases). Tax-adjusted model assumes that
manufacturing industries than the service industry which, in investors maximize after-tax income. As far back as 1967,
turn, can impact on dividend payout ratios. In the present Farrar and Selwyn [16] concluded that in a partial
study, therefore, the depreciation was added back into the net equilibrium framework, individual investors choose the
income in order to net out the impact of depreciation on the amount of personal and corporate leverage and also whether
dividend payout ratios. In addition, we used the market price to receive corporate distributions as dividends or capital
of the share from the beginning of the year instead of current gain. Recently Amidu and Abor [1] found a positive
share price. The variables, together with theoretical relationship between tax and dividend payout ratios.
predictions as to the direction of their influence on dividend Sales Growth
payout ratios are summarized in Table 1.
Sales growth may impact on dividend payout ratios.
DETERMINANTS OF DIVIDEND PAYOUT RATIOS Dividend payout levels are not totally decided after a firm's
Among factors that may be instrumental in affecting the investment and financing decisions have been made [1];
dividend payout decision, based on the literature we can rather, the dividend decision is taken along investment and
mention the followings: financing decisions. Partington [17] points out that firms' use
of target payout ratios, firms’ motives for paying dividends,
Corporate Profitability and the extent to which dividends are determined are
Corporate profitability has long been regarded as the independent of investment policy.
primary indicator of a firm's capacity to pay dividends. Higgins [18] shows a direct link between growth and
Linter [8] and Baker et al. [9] indicate that the dividend financing needs of a firm. Rapidly growing firms require
payment pattern of a firm is influenced by the current year’s external financing because working capital needs normally
earnings and previous year’s dividends. exceed the incremental cash flows from new sales. In an
Baker et al. [9] found that the anticipated level of future earlier paper Higgins [19] argues that payout ratio is
earnings is the determinant of dividend payment. Pruitt and negatively related to a firm's need for funds to finance
Gitman [10] in their study report that current and past years' growth opportunities. Rozeff [20], Lloyd et al. [21], Collins
profits are important factors in influencing dividend et al. [22], and recently Amidu and Abor [1], all show a
payments. Baker and Powell [11] concluded from their significantly negative relationship between historical sales
survey of NYSE-listed firms that dividend determinants are growth and dividend payout.
industry specific and anticipated level of future earnings is Market-to-Book Value
the major determinant. Amidu and Abor [1] found a positive
relationship between corporate profitability and dividend Market-to-book ratio reflects the market view of the
payout ratios. Anil and Kapoor [2] indicate that profitability value of equity in comparison to what shareholders have
has always been considered as a primary indicator of contributed to the firm since the day it was established.
dividend payout ratio. Brook et al. [12] explicitly stated that Omran and Pointon [23] points that market-to-book ratio is
there is no reason to believe that corporate dividend policy is an important factor that influence dividend payout ratio, and
driven by a single goal.
Amidu and Abor [1] found a negative relationship between were adopted from Amidu and Abor’s [1] study. Measures
market-to-book ratio and dividend payout ratios. pertaining to debt-to-equity ratio were taken from Myers and
Bacon’s [27] study. The study applied co-relational and non-
Debt to Equity Ratio experimental research design. The process of measurement is
The debt-to-equity ratio is a financial ratio that indicates central to quantitative research because it provides the
the relative proportion of equity and debt used to finance a fundamental connection between empirical observation and
company's assets. This ratio is also known as risk, gearing or mathematical expression of quantitative relationships.
leverage. Pruitt and Gitman [10] indicate that risk affects The dividend payout (PAYOUT) can be modeled as
firms' dividend policy. Firms with high growth rates and follows:
high dividend payout ratios utilize debt financing and firms
with high leverage compared to their respective industry PAYOUTi = b0 + b1* PROFi + b2*CASHi + b3*TAXi +
[24]. Dhillon [25], however, found conflicting evidence for b4*GROWi + b5*MTBVi + b6*D/Ei + μi,t
the relationship between dividend payout ratios and leverage. where b0 denotes the intercept of the regression equation, and
In some industries payout and leverage ratios are positively b1, b2, b3, b4, b5, and b6 are the regression coefficients of
related while in other industries the relationship is negative. PROF, CASH, TAX, GROW, MTBV, and D/E.
Rozeff [20], Lloyd et al. [21], and Collins et al. [22] found
statistically significant and negative relationship between Sample and Procedures
firm’s risk and the dividend payout ratios. Their findings The study constructed a database from a selection of
suggest that firms having a higher level of risk will pay out approximately 500 financial-reports announced by public
dividends at lower rate. D'Souza [26] also finds statistically companies in year 2007. The selection was drawn from
significant and negative relationship between risk and Mergent Online [http://www.mergentonline.com/compsearch.
dividend payout. asp] to draw a random sample of service and manufacturing
In summary, the literature review points out to the fact companies. Out of approximately 500 financial-reports
that corporate profitability, cash flow, tax, sales growth, announced by public companies in 2007, only 266 financial
market-to-book ratio, and debt-to-equity ratio may impact reports were usable.
upon the dividend payout ratio. Previous researchers
Data Collection
concentrated on the determinants of 'standard ratio of
dividend to earnings, or the ‘standard dividend payout ratio.’ Numerical (quantitative) and financial data were
This study examines the determinants of the 'standard collected to test the hypothesis. Financial statements and
dividend payout ratio' and also the extended payout ratio proxies submitted by companies to Securities and Exchange
whereby the denominator of the ratio includes net income Board of USA were used to collect data.
and depreciation. The difference between the two ratios is
Descriptive Statistics
grater for the manufacturing industry that usually has
relatively high levels of depreciation, in comparison to the Table 2 provides the descriptive statistics for all the
service industry. Clearly depreciation costs may have an regression variables. This shows the average indicators of
impact on the dividend payout ratios. Table 1 below variables computed from the financial statements. The
summarizes the definitions and theoretical predicted signs. average standard dividend payout ratio (measured as yearly
dividends divided by net income after tax) is 26.80 percent
METHODOLOGY AND DATA and the average profitability is 9.40 percent. This means, on
the average, firms pay about 27 percent of their profits as
Measurement
dividends. The average adjusted dividend payout ratio
To remain consistent with previous studies, measures (measured as yearly dividends divided by net income after
pertaining to corporate profitability, cash flow, tax, sales tax plus depreciation) is 5.40 percent.
growth, market-to-book ratio, and dividend payout ratios

Table 1. Proxy Variables Definition and Predicted Relationship

Proxy Variables Definitions Predicted Sign

Profitability (PROF) Earnings before interest and taxes/Total assets +/-

Cash Flow (CASH) Log of cash flow from operating activities +/-
Corporate Tax (TAX) Corporate tax/Net profit before tax +/-
Sales Growth (GROW) (Current sales - Previous sales)/Previous sales +/-
Market-to-Book Value (MTBV) Share price beginning of the year/Net asset value per share-basic +/-
Debt to Equity Ratio (D/E) Total liabilities/Shareholders’ equity +/-
Standard Dividend Payout Ratio (STANDARD PAYOUT) Yearly dividends/Net income after tax +/-
Adjusted Dividend Payout Ratio (PAYOUT) Yearly dividends/(Net income after tax + Depreciation) +/-
Industry Firm is assigned value one if firm is a manufacturing firm and zero otherwise +/-
Table 2. Descriptive Statistics of Independent, Dependent, and Control Variables

Descriptive Statistics (N = 266)

Variables Min Max Mean Std

Profitability (PROF) -0.700 0.450 0.094 0.093

Cash Flow (CASH) 2.850 8.820 5.639 0.935
Corporate Tax (TAX) 0.000 0.920 0.308 0.115
Sales Growth (GROW) -0.440 1.730 0.122 0.196
Market-to-Book Value (MTBV) -10.710 38.460 2.892 3.597
Debt to Equity Ratio (D/E) -4.760 25.800 1.898 2.454
Standard Dividend Payout Ratio (STANDARD PAYOUT) -0.470 13.460 0.268 0.895
Adjusted Dividend Payout Ratio (PAYOUT) -0.040 0.890 0.054 0.098
All variables were calculated using book value.
Profitability (PROF) = Earnings before interest and taxes divided by total assets for firm i.
Cash Flow (CASH) = Log of net cash flows from operating activities for firm i.
Corporate Tax (TAX) = Corporate tax divided by profit before tax for firm i.
Sales Growth (GROW) = Growth in sales for firm i.
Market-to-Book Value (MTBV) = Market-to-book value for firm i.
Debt to Equity Ratio (D/E) = Debt-to-equity ratio for firm i.
Standard Dividend Payout Ratio (STANDARD PAYOUT) = Yearly dividends divided by net income after tax for firm i.
Adjusted Dividend Payout Ratio (PAYOUT) = Yearly dividends divided by net income after tax plus depreciation for firm i.

The cash flow determined as natural logarithm of net Tax

cash flows from operating activities has a mean of 5.64. The
average corporate tax (measured as corporate tax divided by Amidu and Abor [1] found a positive relationship
profit before tax) is 30.80 percent. The average growth rate between tax and dividend payout ratio. We found a positive
in sales is 12.20 percent and the average market-to-book relationship between TAX and STANDARD PAYOUT in
value for the firms is 2.89. The average debt to equity ratio the entire sample and in the manufacturing industry. The
for the firms is 1.90. relationships between STANDARD PAYOUT and all other
variables were non-significant. These finding lend some
Empirical Study support to the findings of Amidu and Abor [2].

Test for multi-colinearity: All variance inflation factor Sales Growth

(VIF) coefficients are less than 2 and tolerance coefficients As stated above, previous empirical studies [1, 19-22]
are greater than 0.5 (see Table 3). found a significantly negative relationship between historical
DISCUSSION sales growth and dividend payout. We found i) a negative
relationship between GROW and STANDARD PAYOUT in
Corporate Profitability the entire sample and in the service industry and ii) a negative
relationship between GROW and PAYOUT in the entire
Amidu and Abor [1] and Anil and Kapoor [2] found a
sample and in the service industry. The findings of this paper
positive relationship between profitability and dividend
are consistent with those of the previous authors’ [1, 19-22].
payout ratios. We found i) a negative relationship between
As expected, different results were found between two
PROF and STANDARD PAYOUT in the entire sample, ii) a
industries, probably because the service industry has an after
positive relationship between PROF and PAYOUT in the
tax cash flow that is closer to the net income, in comparison to
entire sample, iii) a positive relationship between PROF and
the manufacturing industry. Furthermore, there were
PAYOUT in the service industry, and iv) a negative
differences between the two industries in the Adjusted
relationship between PROF and STANDARD PAYOUT in
Dividend Payout Ratios relationships. This is due to the fact
the manufacturing industry. The findings of this paper lend
that we added back depreciation to the denominator of the
some support to the findings of Amidu and Abor [1], Anil
ratio and since the manufacturing industry has typically large
and Kapoor [2], and Baker and Powell [11].
levels of depreciation, the difference between the standard and
As expected different results were found for the two the adjusted payout ratio for the manufacturing industry is
different industries. This supports the findings of Baker and larger.
Powell’s [11] study in which they concluded that dividend
Market-to-Book Value
determinants are industry specific.
D'Souza [26] and Amidu and Abor [1] found a negative
Cash Flow relationship between market-to-book ratio and dividend
Alli et al. [13], Amidu and Abor [1], and Anil and payout ratio. When we measured the 'standard payout ratio'
Kapoor [2] found a positive relationship between cash flow we found no significant relationship at all, either for the
and dividend payout ratios. We found no significant entire sample of for each of the two industries. We did find a
relationship between cash flow and dividend payout ratios, highly significant positive relationship between the market-
contrary to our conjectures. to-book ratio and the adjusted dividend payout ratio for the
Table 3. OLS Regression Estimates on Factors Affecting Profitability (The First Three Parts Refer to the ‘Standard Payout’ and
the Last Three to the ‘Adjusted Dividend Payout’ Ratios as the Dependent Variable)

STANDARD PAYOUT – Entire Sample (N = 266) [R2 = 0.152; F = 6.472]

Un-Standardized Coefficients Standardized Coefficients Collinearity Statistics
t Sig.
B Std. Error Beta Tolerance VIF

(Constant) -0.180 0.358 -0.503 0.615

PROF -2.283 0.701 -0.234 -3.256 0.001 0.651 1.536
CASH -0.057 0.056 -0.059 -1.020 0.309 0.998 1.002
TAX 3.021 0.497 0.377 6.076 0.000 0.873 1.145
GROW -0.683 0.277 -0.144 -2.463 0.014 0.982 1.019
MTBV 0.015 0.017 0.060 0.885 0.377 0.739 1.354
D/E -0.008 0.023 -0.022 -0.342 0.733 0.803 1.245
Industry 0.241 0.108 0.133 2.238 0.026 0.948 1.055

STANDARD PAYOUT – Service Industry (N = 152) [R = 0.087; F = 2.260]

2

Un-Standardized Coefficients Standardized Coefficients Collinearity Statistics

t Sig.
B Std. Error Beta Tolerance VIF

(Constant) 0.729 0.229 3.188 0.002

PROF 0.243 0.362 0.070 0.671 0.504 0.587 1.704
CASH -0.053 0.034 -0.123 -1.536 0.127 0.991 1.009
TAX -0.591 0.367 -0.142 -1.610 0.110 0.819 1.221
GROW -0.488 0.191 -0.208 -2.555 0.012 0.967 1.034
MTBV -0.010 0.009 -0.104 -1.117 0.266 0.738 1.354
D/E 0.013 0.011 0.102 1.172 0.243 0.840 1.191

STANDARD PAYOUT – Manufacturing Industry (N = 114) [R = 0.293; F = 7.170]

2

Un-Standardized Coefficients Standardized Coefficients Collinearity Statistics

t Sig.
B Std. Error Beta Tolerance VIF

(Constant) -0.124 0.679 -0.182 0.856

PROF -7.046 1.924 -0.365 -3.663 0.000 0.685 1.459
CASH -0.050 0.109 -0.040 -0.459 0.647 0.917 1.090
TAX 5.091 0.833 0.531 6.113 0.000 0.902 1.109
GROW -0.669 0.486 -0.115 -1.376 0.172 0.971 1.030
MTBV 0.067 0.046 0.157 1.454 0.149 0.584 1.712
D/E -0.104 0.098 -0.108 -1.061 0.291 0.655 1.526
2
ADJUSTED PAYOUT - The Entire Sample (N = 266) [R = 0.088; F = 3.476]
Un-Standardized Coefficients Standardized Coefficients Collinearity Statistics
t Sig.
B Std. Error Beta Tolerance VIF

(Constant) 0.046 0.035 1.317 0.189

PROF 0.147 0.068 0.160 2.151 0.032 0.651 1.536
CASH 0.000 0.005 -0.001 -0.022 0.983 0.998 1.002
TAX -0.033 0.048 -0.044 -0.690 0.491 0.873 1.145
GROW -0.052 0.027 -0.118 -1.943 0.053 0.982 1.019
MTBV -0.001 0.002 -0.034 -0.482 0.630 0.739 1.354
D/E 0.009 0.002 0.253 3.773 0.000 0.803 1.245
Industry -0.013 0.010 -0.078 -1.259 0.209 0.948 1.055
 (Table 3) contd…..
2
ADJUSTED PAYOUT - Service Industry Sample (N = 152) [R = 0.113; F = 3.041]
Un-Standardized Coefficients Standardized Coefficients Collinearity Statistics
t Sig.
B Std. Error Beta Tolerance VIF

(Constant) 0.104 0.062 1.685 0.094

PROF 0.191 0.098 0.201 1.959 0.052 0.587 1.704
CASH -0.009 0.009 -0.076 -0.962 0.338 0.991 1.009
TAX -0.050 0.099 -0.044 -0.506 0.614 0.819 1.221
GROW -0.100 0.052 -0.155 -1.933 0.055 0.967 1.034
MTBV -0.003 0.002 -0.119 -1.295 0.198 0.738 1.354
D/E 0.010 0.003 0.306 3.565 0.000 0.840 1.191
2
ADJUSTED PAYOUT - Manufacturing Industry Sample (N = 114) [R = 0.153; F = 3.121]
Un-Standardized Coefficients Standardized Coefficients Collinearity Statistics
t Sig.
B Std. Error Beta Tolerance VIF

(Constant) 0.012 0.029 0.394 0.695

PROF -0.064 0.083 -0.083 -0.762 0.448 0.685 1.459
CASH 0.004 0.005 0.084 0.895 0.373 0.917 1.090
TAX -0.011 0.036 -0.029 -0.310 0.757 0.902 1.109
GROW -0.009 0.021 -0.040 -0.440 0.661 0.971 1.030
MTBV 0.007 0.002 0.422 3.571 0.001 0.584 1.712
D/E -0.004 0.004 -0.109 -0.979 0.330 0.655 1.526
Dependent Variables: i) STANDARD PAYOUT and ii) PAYOUT.
STANDARD PAYOUT = Dividend payout ratio [Yearly dividends divided by net income after tax for firm i].
PAYOUT = Adjusted dividend payout ratio [Yearly dividends divided by net income after tax plus depreciation for firm i].
PROF = Profitability.
CASH = Cash Flow.
TAX = Corporate tax.
GROW = Sales Growth.
MTBV = Market-to-book value.
D/E = Debt-to-equity ratio.
Industry = Firm was assigned value one if firm was a manufacturing firm and zero otherwise.
N = Number of usable companies.
manufacturing industry. Our findings contradict the findings dividend that the net cash flow generated by the firm gave
of D'Souza [26] and Amidu and Abor [1], perhaps because rise to results that are different from those obtained with the
they did not add back depreciation costs into the net income 'usual' dividend payout ratio as the dependent variable. We
after tax, and thus did not refer to the dividend/net cash flow also found that some of the relationships between the
concept that may be a more relevant indicator of 'dividend independent variable and the dependent variable for
policy.' manufacturing firms are different from those for firms in the
service industry.
Debt to Equity Ratio
LIMITATIONS OF THE RESEARCH
Previous empirical studies [20-22, 26] reported a
Because this study was co-relational and non-
negative relationship between firm’s risk and the dividend
experimental (i.e., none of the participating firms will be
payout ratios. We found neither significant relationship
assigned to conditions) a causal link between independent
between the D/E ratio and the 'standard' dividend payout
variable (e.g., sales growth) and dependent variable (e.g.,
ratio in the entire sample nor in each of the two industries.
dividend payout ratio) cannot be definitively established.
When the Adjusted dividend payout ratio was defined as the
Therefore, a link between independent variable (e.g., sales
dependent variable, we found that for the entire sample there
growth) and dependent variable (e.g., dividend payout ratio)
is a positive relationship between D/E and dependent
can only be suggested. Additionally, the findings of this
variable, and for both the service and the manufacturing
study can only be generalized to firms similar to those who
industries.
participated in the research.
CONCLUSION
FUTURE RESEARCH
This study examined the determinants of dividend payout
Future research should investigate generalization of the
ratios of American service and manufacturing firms. We
findings beyond the United States. The influence of price-
found, inter alia, that the view of the dividend payout ratio
earning-ratio and debt-to-equity ratio on dividend payout
on an adjusted basis, namely the ratio between the cash
policy should be investigated in the future study. In addition,
future research may examine the non-linear relationships
among independent and dependent variables. Important
control variables such as industry sector, etc., should also be
used to determine other factors that influence dividend
payout ratios.