The Effect Of The Ratio Of Dividend And Dividend Payments Per Share On The Stock Price Of Manufacturing Companies On The Indonesia Stock Exchange

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The Effect of Dividend and Dividend Payment Ratios per Share on the Share Price of Manufacturing Companies on the Indonesia Stock Exchange

Introduction

The Indonesia Stock Exchange (IDX) is one of the largest stock exchanges in Southeast Asia, with a wide range of companies listed across various sectors, including manufacturing. The manufacturing sector is a crucial part of the Indonesian economy, contributing significantly to the country's GDP. However, the sector faces numerous challenges, such as fluctuations in raw material prices and changes in market demand, which can affect profits. In this context, understanding the factors that influence the stock prices of manufacturing companies is essential for investors, policymakers, and company management.

The Importance of Dividend Payments

Dividend payments are a critical aspect of a company's financial strategy, as they provide a way for companies to distribute profits to shareholders. The ratio of dividend payments (DPR) and dividends per share (DPS) are two key metrics that investors use to evaluate a company's dividend policy. The DPR is the percentage of net profit paid to shareholders in the form of dividends, while DPS is the total dividends distributed per share. In this study, we aim to investigate the effect of DPR and DPS on the stock prices of manufacturing companies listed on the IDX.

Methodology

This study uses a quantitative approach, analyzing secondary data obtained from the annual financial statements of 31 manufacturing companies listed on the IDX during the 2007-2009 period. The data is analyzed using descriptive statistics and statistical analysis, including global tests (F-Festern tests) and partial tests (T-tests) with a significance level of α = 5%. The analysis is conducted using SPSS software version 16.00 for Windows.

Results

The results of the global test show that the model used in this study is suitable for use. Furthermore, the partial test analysis reveals that the two independent variables, namely DPR and DPS, have a significant influence on stock prices. This indicates that companies that provide higher dividends can increase the attractiveness of investors, leading to an increase in stock prices.

Additional Analysis and Explanation

The ratio of dividend payments (DPR) is a critical metric that investors use to evaluate a company's dividend policy. A higher DPR indicates that the company is distributing a larger proportion of its net profit to shareholders, which can be a positive signal to investors. On the other hand, dividends per share (DPS) are the total dividends distributed per share, which can provide a positive signal to investors that the company is willing to share its profits with shareholders.

In the context of manufacturing companies, good dividends can be an indicator of financial health and competitiveness. The manufacturing sector often faces significant challenges, such as fluctuations in raw material prices and changes in market demand, which can affect profits. Therefore, companies that are able to maintain and even increase dividends, despite difficult market conditions, are often considered safer investments.

Theoretical Framework

The results of this study are in line with financial theory, which states that dividends are one of the important factors that influence investment decisions. Investors tend to prefer to invest in companies that provide consistent dividends, as dividends provide reliable income in addition to the potential of capital gains from the increase in stock prices.

Conclusion

In conclusion, this study provides evidence that the ratio of dividend payments and dividends per share have a significant influence on the stock prices of manufacturing companies listed on the IDX. The results of this study have important implications for investors, policymakers, and company management. Manufacturing companies on the IDX must consider the ratio of dividend payments and dividends per share in their business strategy, as implementing transparent and sustainable dividend policies can be an effective tool to attract investors and increase stock prices.

Recommendations

Based on the findings of this study, we recommend that manufacturing companies on the IDX:

  1. Implement transparent and sustainable dividend policies: Companies should consider the ratio of dividend payments and dividends per share in their business strategy and implement policies that are transparent and sustainable.
  2. Communicate dividend policies effectively: Companies should communicate their dividend policies effectively to investors, providing clear information about their dividend payout ratio and dividends per share.
  3. Monitor and adjust dividend policies: Companies should regularly monitor their dividend policies and adjust them as necessary to ensure that they remain competitive and attractive to investors.

By following these recommendations, manufacturing companies on the IDX can increase their attractiveness to investors, leading to an increase in stock prices and future company growth.
Frequently Asked Questions (FAQs) about the Effect of Dividend and Dividend Payment Ratios per Share on the Share Price of Manufacturing Companies on the Indonesia Stock Exchange

Q: What is the significance of dividend payments in a company's financial strategy?

A: Dividend payments are a critical aspect of a company's financial strategy, as they provide a way for companies to distribute profits to shareholders. A company's dividend policy can have a significant impact on its stock price and attractiveness to investors.

Q: What is the difference between the ratio of dividend payments (DPR) and dividends per share (DPS)?

A: The ratio of dividend payments (DPR) is the percentage of net profit paid to shareholders in the form of dividends, while dividends per share (DPS) are the total dividends distributed per share. Both metrics are important for investors to evaluate a company's dividend policy.

Q: How do manufacturing companies on the Indonesia Stock Exchange (IDX) benefit from implementing transparent and sustainable dividend policies?

A: Manufacturing companies on the IDX that implement transparent and sustainable dividend policies can increase their attractiveness to investors, leading to an increase in stock prices and future company growth. This is because investors tend to prefer to invest in companies that provide consistent dividends, as dividends provide reliable income in addition to the potential of capital gains from the increase in stock prices.

Q: What are the challenges faced by manufacturing companies on the IDX in maintaining and increasing dividends?

A: Manufacturing companies on the IDX often face significant challenges, such as fluctuations in raw material prices and changes in market demand, which can affect profits. Therefore, companies that are able to maintain and even increase dividends, despite difficult market conditions, are often considered safer investments.

Q: How can manufacturing companies on the IDX communicate their dividend policies effectively to investors?

A: Manufacturing companies on the IDX can communicate their dividend policies effectively to investors by providing clear information about their dividend payout ratio and dividends per share. This can be done through regular financial reports, investor presentations, and other communication channels.

Q: What are the implications of this study for investors, policymakers, and company management?

A: The results of this study have important implications for investors, policymakers, and company management. Investors should consider the ratio of dividend payments and dividends per share when evaluating a company's dividend policy. Policymakers should consider the impact of dividend policies on the attractiveness of companies to investors. Company management should consider the ratio of dividend payments and dividends per share in their business strategy and implement policies that are transparent and sustainable.

Q: What are the limitations of this study?

A: This study has several limitations, including the use of secondary data, the limited sample size, and the focus on manufacturing companies on the IDX. Future studies should aim to address these limitations and provide a more comprehensive understanding of the effect of dividend and dividend payment ratios per share on the share price of manufacturing companies on the IDX.

Q: What are the future research directions for this study?

A: Future research directions for this study include:

  1. Investigating the impact of dividend policies on the stock prices of companies in other sectors: This study focused on manufacturing companies on the IDX. Future studies should investigate the impact of dividend policies on the stock prices of companies in other sectors.
  2. Examining the relationship between dividend policies and other financial metrics: This study focused on the relationship between dividend policies and stock prices. Future studies should examine the relationship between dividend policies and other financial metrics, such as earnings per share and return on equity.
  3. Investigating the impact of dividend policies on the attractiveness of companies to investors: This study found that companies with higher dividend payments and dividends per share are more attractive to investors. Future studies should investigate the impact of dividend policies on the attractiveness of companies to investors.