Earnings Power and Dividend Strategies: An Empirical Investigation of Their Joint Impact on Stock Prices in the Manufacturing Industry

This study investigates the effect of Dividend Per Share (DPS) and Earnings Per Share (EPS) on stock prices in the manufacturing sector of companies listed on the Indonesia Stock Exchange (IDX) in 2021. Employing a quantitative approach, multiple linear regression analysis was used to examine the relationships between the independent variables, DPS and EPS, and the dependent variable, stock prices. The results reveal that while DPS and EPS jointly have a significant influence on stock prices, EPS exhibits a more substantial and statistically significant impact when considered individually. This finding aligns with signalling theory, which suggests that higher profitability, as reflected in EPS, serves as a positive signal to investors regarding the future prospects of a company. The research also shows that DPS, while not significant on its own, plays an important role when combined with EPS, contributing to investor confidence and the overall stability of stock prices. These findings imply that investors in Indonesia’s manufacturing sector tend to prioritise profitability over dividend payouts when making investment decisions, although dividend policy remains a secondary but supportive factor in the valuation process. This study contributes to the growing body of literature on stock price determinants by providing empirical evidence from an emerging market context, specifically the Indonesian manufacturing industry. The results underscore the critical role of earnings in driving stock valuations and offer practical insights for investors and corporate managers in emerging economies.