CHAPTER 4: DATA ANALYSIS

4.1 Introduction
This chapter deals with analysis of impact of dividend policy on financial performance of
Land Rover. It is mentioned in the last chapter of this study that the data was collected through
secondary sources and then this data was analysed on SPSS software to come to a conclusion of
the study. Correlation analysis was performed on the data collected in order to find out whether
an association existed between dependent and independent variables or not. Moreover, regression
analysis was performed in order to find out the existence of relationship between independent
variable (dividend policy) and dependent variable (financial performance) of Land Rover. The
hypothesis developed in the first chapter for the purpose of this study will be analysed in this
chapter.

4.2 Correlations

4.2.1 Correlation Analysis

The study uses Pearson r statistic to measure bivariate correlations. The values which lie
between 0 and 0.3 indicate that there is no association between variables or no correlation.
Values lying between 0.3 and 0.5 indicate a positive but weak association of variables. Values
that are found within the range of 0.5 and 0.7 show that the association between variables is
moderately positive. Moreover, a strong positive association exists between variables when the
value of Pearson Correlation is found between the range of 0.7 and 1.0. Similarly, the values

which lie between -0 and -0.3 indicate that there is no association between variables or no
correlation. A value lying between -0.3 and -0.5 indicates a negative and weak association of
variables. Values that lie between the range of -0.5 and -0.7 shows that the association between
variables is moderately negative. Moreover, a strong negative association exists between
variables when the values of Pearson Correlation lie between the range of -0.7 and -1.0. The
level of significance of this association is measured the level of 95% with a two tailed test.

4.2.2 Correlation between Dividend Payout and Net Profit Percentage

The result of correlation analysis for finding out the association between the dividend
payout ratio and net profit percentage is shown in the table below. It presents the value of
Pearson Correlation and the significant value that measures the significance of association.

Correlations

Dividend Payout
Ratio
Net Profit Margin

Pearson Correlation

Dividend

Net Profit

Payout Ratio

Margin

Sig. (2-tailed)

.750

N
Pearson Correlation

6
.168

Sig. (2-tailed)

.750

.168

6
1
6

As shown in the table, the value of Pearson Correlation is 0.168. This is a value that lies
within the range of 0 and 0.3. The nearness of value to zero shows that the variables do not have
any correlation between them. Talking about the significance of association between variables at
the level of 5% with two tailed test, it has a significant value of 0.750. This value is greater than
5% or 0.05. Therefore it is confirmed that no association exists between variables. Hence the
result suggests that no correlation exists between dividend payout ratio and net profit margin of
Land Rover.

4.3 Regression Analysis

The primary objective if the research is to find out the impact of dividend payout ratio on
net profit percentage of Land Rover. In order to achieve this objective, the researcher conducted
a regression analysis of the data collected that provides the relationship between dividend payout
ratio (independent variable) and net profit margin (dependent variable). The data used for
analysis was collected for 6 years thus providing 6 years data that helped in conducting linear
regression analysis. The results of regression are shown in tables below.

4.3.1 Model Summary

The table below provides the model summary for regression. It shows the value of R which
measures the association between the variables i.e. dependent and independent, the value of R
square which is also known as the coefficient of determination that measures the extent of
influence of independent variable on the dependent variable. Moreover, the table also presents

Adjusted R Square which is the measure of reliability of results of regression analysis.

Model Summary

Model
1

R Square

.168

.028

Adjusted R

Std. Error of

Square

the Estimate

-.215

.043106

a. Predictors: (Constant), Dividend Payout Ratio

According to the results of table shown above, no association can be seen between the dependent
variable (net profit percentage) and independent variable (dividend payout ratio). The value of R
reveals the strength of existing association between variables. The value of R is 0.168 which is
very small and revealing that there is no or negligible association between dependent and
independent variables. The value of R Square (coefficient of determination) in the table is 0.28.
This explains that keeping some other factors constant that are not mentioned in this study, the
value of dividend payout ratio contributes to 28% of variance in net profit percentage of Land
Rover while other factors that have been held constant account for 72% of variance in net profit
percentage.
The variation occurred due to dividend payout is very low i.e. 28%. Hence it cannot be relied
upon and it can be said that dividend payout is unable to explain the changes in net profit
percentage of Land Rover. The value of Adjusted R Square is -0.215 which means that results
cannot be relied upon. Hence the model of regression that is developed cannot be relied on to
clarify the trends in net profit percentage of Land Rover.

ANOVAb
Sum of
Model
1

Regression

Squares
.000

df

Mean Square
1

.000
.002

Residual

.007

Total

.008

Sig.
.117

.750a

a. Predictors: (Constant), Dividend Payout Ratio

b. Dependent Variable: Net Profit Margin
The value of F statistic in the table is 0.117 and the significant value is 0.750 which is greater
than the critical value at the level of 5% in a two tailed test i.e. significant value is large. These
values reveal that the model of regression that is developed is statistically insignificant.
Therefore the model developed cannot be trusted in order to explain the impact of dividend
policy on financial performance of Land Rover.

Coefficientsa

Model
1

Unstandardized

Standardized

Coefficients

Coefficients

Std. Error

(Constant)

.075

.024

Dividend Payout

.123

.360

Ratio

Beta

t
.168

Sig.

3.094

.036

.341

.750

a. Dependent Variable: Net Profit Margin

The table of coefficients presents that the independent variable i.e. dividend payout ratio is
positive but insignificant. The p-value (significant value) is less than 0.05. Thus, with the
significant value of less than 0.05, the coefficient is insignificant statistically and does not
explain the influence of predictors on the net profit percentage of Land Rover. The coefficient
depicted in the table can be used to develop the model of regression which shows the relationship
between independent and dependent variables as follows:

Y = 0 + X1 + e

Where Y = financial performance of land rover measured by net profit percentage

0 = constant that explains net profit percentage of Land Rover without including the selected
predictor
X1 = dividend payout ratio of Land Rover
e = Error Term
Therefore, it can be said that the regression model is;

Y = 0.075 + 0.123 X1

Hence, the model depicts that keeping the independent variable constant, net profit
percentage of Land Rover would be 0.075. This clarifies that without the impact of dividend
payout ratio, the value of net profit percentage of Land Rover would be 0.075. The model also
demonstrates that increase in one unit of dividend payout ratio would result in an increase in net

profit percentage equivalent to 0.123. Thus the independent and dependent variables are not very
much related to each other.
Moreover, the model shows that the value of coefficient of dividend payout ratio and net
profit percentage is 0.123. This clarifies that increase in one unit in the value of dividend payout
ratio; the financial performance of Land Rover would increase by 0.123 times. Thus the
relationship between two variables is statistically insignificant and an increase in one unit of
dividend payout ratio would lead to 0.123 times of variability in the same direction to net profit
percentage of Land Rover.

4.4 Summary and Interpretation of the Findings

The study is inclined towards evaluating the relationship between dividend policy (independent
variable) and financial performance (dependent variable) of Land Rover. Such relationship or
association was tested using correlation analysis. The level of significance was tested at 95%.
The results of correlation analysis show that no association exists between dividend policy and
financial performance of Land Rover. Such conclusion is based on the value of Pearson
correlation coefficient which is 0.168. The test clarified that, with a Pearson correlation value of
0.168, no correlation exists between dividend policy and financial performance of Land Rover.
This result was also insignificant at the level of 5% which indicates that increase or decrease in
the value of dividend payout ratio would not result in increase or decrease of net profit
percentage of Land Rover.
Findings also showed that the financial performance of Land Rover and the value of coefficient
of correlation 0.168 which is a negligible coefficient of correlation. Therefore, it can safely be

said that the dependent and independent variables are not associated with each other i.e. dividend
policy has no association with financial performance of Land Rover.

From the analysis of regression results, the value of independent variable i.e. dividend payout
ratio, explains 2.8% of the changes in financial performance of Land Rover. This shows that the
factors that have not been selected for the study would account for 97.2% of changes in financial
performance of Land Rover. This clarifies that no relationship exists between dividend policy
and financial performance of Land Rover. The model of regression shows that increase in one
unit of dividend payout ratio of Land Rover would result in increase in 0.123 units of financial
performance of Land Rover which is highly insignificant or something that is negligible for the
purpose of coming to a conclusion.

4.5 Discussion

The research was conducted with the main objective of finding out the impact of dividend
policy of Land Rover on financial performance of Land Rover. The financial performance is
selected as the dependent variable and measured by net profit percentage while dividend policy
has been selected as the dependent variable or predictor which is measured by dividend payout
ratio of Land Rover during the period of 2010-2015.
Dividend policy is a very crucial financial policy; it remains one of the more intricate and
puzzling issue in the field of corporate finance (Baker et al. 2002). Shareholders use dividend as
a means to wrest financial resources from the control of management, on the other hand,
business managers use dividend in order to give credible signals of profitability to the capital

markets. Distributing profits in the favour of shareholders acts as a signal of treasury ease
because its interpretation can mean exposure of different hurdles that exist at the investment
horizon level. There are several dividend policies that a company can adopt like residual
dividend policy and constant growth policy. Dividends matter as the value of a companys share
price depends on the present value of future payments of dividends (Lally 2013). Dividend
policy is basically a choice to either pay dividends or retain funds within the company for the
purpose of reinvestment. If the worth of the company depends on its dividend payments, then a
companys dividend policy will have a direct effect on the companys cost of capital.
Theoretically speaking, if a company decides to reinvest capital now, the capital will grow by
reinvestment in more profitable avenues and the company will be able to pay a higher rate of
dividend in the future. On the other hand, retaining profits for the purpose of reinvestment is an
action that may not be well received by a companys shareholders. This is often interpreted
negatively by the financial markets, particularly in the cases of listed companies. Authors have
also made an examination with respect to the relationship between changes in dividends and
alternate metrics of future profitability, their examination has revealed that changes in dividend
have a positive relation to future earnings (Nissim and Ziv 2001). Despite these findings, there is
a lack of unanimity and consensus among empirical and theoretical researchers regarding the
relation between a companys dividend policy and its financial performance. Apple and Google
are among some of the most successful companies that choose not to pay dividends (Elgammal
2014). This is an indication that it is possible to be successful without the payment of dividends.
This is also against the view of other authors who claim that the dividend policy controversy is
among the major unsolved issues in the field of corporate finance (Bhattacharyya et al. 2008)

Talking about the significance of association between variables at the level of 5% with
two tailed test, it has a significant value of 0.750. This value is greater than 5% or 0.05.
Therefore it is confirmed that no association exists between variables. The value of R is 0.168
which is very small and revealing that there is no or negligible association between dependent
and independent variables. The value of R Square (coefficient of determination) in the table is
0.28. This explains that keeping some other factors constant that are not mentioned in this study,
the value of dividend payout ratio contributes to 28% of variance in net profit percentage of Land
Rover. The value of F statistic in the table is 0.117 and the significant value is 0.750 which is
greater than the critical value at the level of 5%. These values reveal that the model of regression
that is developed is statistically insignificant. The regression model developed above depicts that
keeping the independent variable constant, net profit percentage of Land Rover would be 0.075.
This clarifies that without the impact of dividend payout ratio, the value of net profit percentage
of Land Rover would be 0.075. The model also demonstrates that increase in one unit of
dividend payout ratio would result in an increase in net profit percentage equivalent to 0.123.
Thus the relationship between two variables is statistically insignificant and an increase in one
unit of dividend payout ratio would lead to 0.123 times of variability in the same direction to net
profit percentage of Land Rover which is very small and therefore considered negligible.
The chapter suggests that the selected variables proved to be helpful in achieving the
results for the study. The data collected through secondary sources was authentic and was
derived from reliable sources. The first part of the chapter showed the correlation analysis which
depicts the magnitude and strength of association between variables. Moreover, in order to find
out the existence of any relationship between dependent and independent variables, regression
analysis was performed. The significant values derived from regression analysis showed that the

predictor (independent variable) has no significant impact on the dependent variable. So we can
say that we accept our null hypothesis i.e. dividend policy of Land Rover has no significant
impact on financial performance of Land Rover. The dividend policy is measured by calculating
the dividend payout ratio while financial performance is measured by calculating net profit
percentage from annual reports of Land Rover.