Factors Affecting Dividend Payout Policy Of Savings And Credit Cooperative Societies Licensed By Sacco Society Regulatory Authority (Sasra)

Abstract

Savings and Credits Cooperatives Societies (SACCOs) licensed by SASRA are required to adhere to rules and regulations stipulated in the SACCO Societies regulations 2010. These regulations are risk oriented rules providing minimum operational regulations and prudential standards required of deposit-taking SACCO Societies to ensure financial stability of the SACCO sub sector and to maximize shareholders’ wealth. This research sought to fill existing knowledge gap to determine the factors affecting Dividend Payout Policies of SACCOs licensed by SASRA and answer the question of how much profits should be distributed to shareholders. A descriptive design was used to measure the relationship between explanatory and dependent variables. The target population was 124 SACCOs licensed by SASRA. A sample size of 34 SACCOs from Nairobi area were identified for the research from four different sectors. Secondary data was collected from sampled SACCO’s financial statements for a period of five years (2009-2013). Regression model was used to find the relationship between explanatory variables (Current earnings, Profitability, Liquidity, Financial leverage and Size of the SACCO) and dependent variable (Dividend Payout ratio). This research was concluded based on the above regression model of five years. Significant and non significant factors affecting dividend payout policies of SACCOs licensed by SASRA were determined. From the regression model, the study found out that there were factors influencing dividend payout ratio of SACCOs licensed by Sacco Society Regulatory Authority (SASRA), which are profitability, liquidity, current earnings, size of the SACCO and financial leverage. The study concluded that size of the Sacco determines its dividend payout ratio since investors perceive big SACCOS making profits more likely to pay more dividends. The study further recommended that shareholders should also recognize that, when a SACCO has unfavorable dividend payout ratio; it is due to either low profits or investment in growth opportunity.