Introduction
Effective and efficient financial management of
a company become critical for the success and
competition of businesses. The financial
management of companies requires a dynamic,
sincere, committed, knowledgeable, and
visionary team. A good financial performance of
a company depends upon the proper utilization of
financial resources. Financial resources are
scarce and must be utilized wisely. Many
financial decisions like capital budgeting,
financing, assets management, liquidity, risk
management, investor’s relation, government
reporting, employee compensations, and
dividend decision affect the company’s
performance. All of them require systemic and
scientific analysis. Before 1950s, there were only
two functions of the financial management, just
raising funds and cash management. However,
nowadays this section of a company requires lots
of responsibilities, and all responsibilities have
equal importance.
There is no rule of thumb for the development
and progress of companies, but best practices can
achieve the targets of a company. The future of a
company links with a good brand image, and a
good brand image needs a lot of attention such as
resources (financial and non-financial),
commitment, sincerity, artificial intelligence,
company mission, and vision. It is important to
know why some fail to achieve the desired
objectives and some become successful
companies. Companies usually fail due to war,
recession, misuse of resources, poor
management, high taxation and interest rates,
excessive regulations, inability to compete, lack
of trust from the public’s side, agency problems,
trust deficit between investors and the company,
hostile takeover, and inappropriate strategies.
They do not synchronize the resources according
to the need and priority of the factor/area. A
company needs a huge amount of funds to
operate, and it has to utilize its resources after
proper analysis like technical analysis and
efficient market analysis. Dividend decision
plays a vital role in raising and using funds in
companies. Dividend decisions of companies
should properly evaluate the possible factors
associated with it, especially the cost and earning
that should be considered while making the
dividend policy of the company. The main
objective of the study is to examine the factors
affecting the dividend payout of cement industry
of Saudi Arabia. The factors considered in this
study are size, profit, leverage and liquidity.
While dividend payout is taken as dependent
variable.
Dividend is a return of investment. Every
investor wants to earn maximum return on their
investment. Investors invest money where they
get higher returns. Some investors are long term
so they do not consider higher returns in the near
future, but short-term investors always consider
higher returns in the near future. Investors
consider the following factors for their
investment in the company’s share: earnings per
share (EPS), dividend payout (D/P), price to
earnings (P/E), return on equity (ROE), debt to
assets (DTA), book value per share (BV/S), and
market price. They also check the trend of past
dividends. After that they decide to make an
investment in the company shares. The existing
shareholders make a decision to retain, sell, or
buy stocks of a company (Patra et al., 2012).
Higher dividend always motivates investors to
make investments in a company’s shares.
Company’s dividend decisions depend upon
internal and external factors: internal factors like
company growth, profit, size, leverage, and
liquidity, whereas external factors like inflation,
competitors’ dividend policy, tax rate, interest
rate, policy control, attitude of powerful
investors, and so on. In our understanding very
few studies have been conducted in Middle East
in general and particularly in the cement industry
of Saudi Arabia. Hence, the current study will
contribute to the dividend theories in the context
of Middle East.
Indeed, higher return on investment is the
ultimate main target of investors and companies.
No company has unlimited resources; each
company needs financial resources for
expansion, growth, profit maximization
strategies. The cement industry has a lot of
opportunities for expansion and growth. Such an
industry needs a substantial amount of financing.
Therefore, dividend payout plays a vital role in
the company expansion, growth and profit
maximization. That is why, it is important to
examine the factors affecting the dividend payout
of the cement industry. This study would also
contribute to the existing literature for
researchers and practitioners for future research.
This study would also help to the cement industry
to design a comprehensive dividend policy.
The current study is consisted into 5 sections.
First section of the study is related to
introduction, which contains brief introduction of
cement industry, objectives, significance of the
study. Section two of the study is described the
review of literature. While third section is
demonstrated the research methodology of the