I LIKE YOUR COMPANY? DIVIDEN PAYOUT RATIO: EFFECT FROM FREE CASH FLOW AND PROFITABILITY

Resmi Afifah Fadilah, Muslim Alkautsar, Nizar Alam Hamdani, Marti Dewi Ungkari

Abstract

The purpose of this research to analyze the effect of the company financial rations performance profitability (ROI), free cash flow toward Dividend payout ratio (DPR). We applied causal method for our research and the data obtained from Indonesian Stock Exhange (BEI) website during the period 2005- 2014 on PT Astra International, Tbk (ASII). These data were analyzed by using PLS analysis technique (partial least square) through the PLS software.

Several interesting findings emerged from this study. It turns out, that eventhough FCF affect profitability (ROI), it has no significant direct effect on DPR. Surprisingly, FCF able to affect DPR through ROI. Another interesting finding is that Astra International Tbk can use DPR as part of its strategy to draw the interest of investors to make investment on the company. The evidence shows that the investors are more likely to invest on the company when the company shows a more stable level of DPR. The implications of these findings for future studies are also discussed.

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