Analysis of the Impact of Dividend on Returns Based on Market Condition

This study investigates the dividend’s impact on returns with profitability and free cash flow as control variables. The purpose of this paper is to analyze the effect of dividends on returns during both advancing and declining markets. The data utilized as the sample was gathered from non-financial companies listed on the Indonesian Stock Exchange from 2008 to 2017. The generalized least square method was used to analyze the impact of dividends on returns during advancing and declining markets. Variables used in this investigation are Dividend, Return, Beta, Market Capitalization, Book Value of Equity, Profitability, and Free Cash Flow. Results show that dividends have a significantly positive impact on market returns during both advancing and declining markets. The influence towards both cash and stock dividends is the same, namely significantly positive toward returns. The limitation of this research is that the results cannot attest that market conditions influence dividend’s role toward returns in Indonesia. Therefore, it is suggested that a new benchmark be utilized in future research to determine whether the market condition is declining or advancing.