Does Profitability Moderate the Relationship Between the Leverage and Dividend Policy of Manufacturing Firms in Nigeria and South Africa?

This study investigates the moderating effect of profitability on the relationship between leverage and dividend policy among listed manufacturing firms in Nigeria and South Africa. Leveraging a sample of 915 firm-year observations from 2013 to 2022, the research applies panel Tobit regression to address the censored nature of dividend data, with logistic regression serving as a robustness check. The findings reveal that leverage negatively impacts dividend payout in Nigerian firms, a relationship that is less pronounced in South African firms, highlighting differences in financial flexibility between the two economies. Additionally, profitability strengthens the leverage-dividend policy relationship in Nigeria, enabling firms to maintain dividend distributions despite high leverage levels. This moderating effect is weaker in South Africa. The study underscores the importance of context-specific financial strategies, advocating for enhanced access to affordable credit in Nigeria, while emphasizing market stability in South Africa. This research contributes to understanding dividend policy in emerging markets by elucidating the interactive roles of leverage and profitability in shaping corporate dividend practices.