  Determination of the correct mix of dividend and retained earnings and its
effect on profitability has been a subject of controversy in financial
management literature. This paper seeks to contribute to the ongoing debate by
examining the relationship between dividend payout policy and the financial
performance of 60 firms listed on the National Stock Exchange between
2009-2018. The Return on Assets (ROA) served as a surrogate for the dependent
variable, profitability, while the Dividend Pay-out ratio proxied for dividend
policy and was the only explanatory variable. Control variables include firm
size, asset tangibility, and leverage. Regression result reveals a positive and
significant relationship between dividend payout policy (DPO) and firm
performance (ROA). It is recommended that companies should endeavor to put in
place a robust dividend payout policy that would encourage investment in
projects that give positive Net Present Value.
