THE NEXUS BETWEEN DIVIDEND PAYOUT RATIOS, RETURN ON ASSETS AND LEVERAGE: A 15-YEAR ANALYSIS OF FORTUNE 500 COMPANIES

Authors

  • Hassan Aldboush Faculty of Business, Department of Banking and Finance, Al-Balqa Applied University
  • Nashat Ali Almasria A'Sharqiyah University (ASU), Oman.
  • Tawfiq Taleb Tawfiq Brescia University, USA
  • Hala Tawaha Research Assistant and PhD Student in Financial Economics. University Address: The University of New Orleans USA

Keywords:

Dividend Payout Ratio, Return on Assets, Corporate Finance, FP, Leverage, Time Series Analysis.

Abstract

The study aims to establish the dynamic relationship between Dividend Per Share (DPR) and Return on Assets (ROA) and leverage of the Fortune 500 firms between 2007 and 2022 using correlation analysis, multiple linear regression, and time series decomposition with considering the fixed-effects and the random-effects model. Factor analysis helps identify financial management elements impacting corporate performance, enabling stakeholders to make informed decisions to enhance shareholder value. The DPR in a business related not only to the business’s strategy but also to the ROA. The study reveals that firms with high DPR have low ROA due to excessive dividends, reducing profitability. Leverage has a negative relationship with DPR and ROA, indicating risks associated with high debt levels. Profit margins increased over 15 years; a trend common for Fortune 500 enterprises. The study finds that the dividend policy to be moderate, with high DPR inversely proportional to ROA and recommends conservative policies for better finance performance. It also briefly revises dividend policies in corporations, especially in emerging economies, and provides suggestions for future study.

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Published

2025-05-10

Issue

Vol. 16 No. 4 (2024): International Journal of Economics and Financial Studies

Section

Original Article