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The paper is to determine the impact of free cash flow on dividend policy of oil and gas companies in Nigeria. The data was collected from annual reports and accounts of the sampled companies for the period of twelve years from 2003 to 2014. Data is analyzed by means of descriptive statistics to provide summary statistics for the variables and correlation analysis is also carried out using Pearson correlation technique for the correlation between the dependent and explanatory variables. Multiple regression technique was used to analyze the data using STATA software version 12.00. The study found that free cash flow and earnings per share have positive effects on the dividend policy while a negative significant relationship is found between leverage and dividend policy of listed oil and gas companies Nigeria. Companies in which high proportion of shares are held by managers are more reluctant in paying a higher dividend. Hence, The study recommends that companies in the oil and gas sector should endeavor to improve the level of free cash and profitability while reducing the level of leverage thereby paying a higher dividend payout policy. Keywords : Free cash flow, Dividend policy, Earning per share, Leverage
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