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There have been mixed results from numerous researches conducted not only in Nigeria but also in the rest of the world. Specifically, the relevance/irrelevance of dividend policy in valuation of firms ’ market share prices has always generated a controversy. The concern for this thus provided an inspiration to examine the impact of dividend policy on the stock prices of quoted firms in Nigeria. The research was conducted on 22 companies listed on Nigerian Stock Exchange (NSE) using secondary data on their firms ’ fundamentals as available on their respective annual reports from 2009 to 2013 and their closing quoted share prices extracted from two Nigerian Dailies – The PUNCH and The GUARDIAN. Regression analysis, Correlation analysis and Granger Causality Test were used to test research hypothesis on 110 observations and the findings reveal that both dividend payout and retained earnings are significantly relevant in the market price per share of the companies. It is, therefore, recommended that optimal trade-off between dividend payment and retained earnings that would increase the shareholders ’ wealth in terms of cash and/or stock dividend as well as capital appreciation should be adopted by Nigerian listed firms.
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