ABSTRACT: Dividend policy remains a complex issue in many organizations due to its implications for both business sustainability and shareholder interests. While managers aim to reinvest profits to enhance performance, shareholders focus on returns from dividend payouts. This study examines the effect of dividend policies on firm performance in Nigeria, using data from the audited financial statements of selected firms listed on the Nigerian Stock Exchange between 2011 and 2020. Secondary data were analysed using univariate and multiple regression techniques, along with descriptive and inferential statistics. Dividend policy was measured by dividend yield (DY), dividend payout ratio (DPR) and price-earnings ratio (PER), while firm performance was assessed using return on assets (ROA), return on equity (ROE) and Tobin’s Q (TQ). The findings reveal that dividend policy variables have statistically significant effects on firm performance, although the direction and magnitude vary across sectors and performance metrics. For instance, dividend payout positively influenced Tobin’s Q in the manufacturing sector but had a negative impact in financial firms. The study concludes that dividend policies significantly influence firm performance and recommends that investors should consider a broad range of financial indicators, not just dividend yield when evaluating investment opportunities.

KEYWORDS – Dividend policy, firm performance, financial service firms, manufacturing firms, Nigeria