The Effect of Profitability, Interest Coverage Ratio and Foreign Ownership on Stock Returns with Dividend Policy as a Moderating Variable

Abstract

This study examines the effects of profitability, the Interest Coverage Ratio (ICR), and foreign ownership on stock returns, with dividend policy as a moderating variable, among energy sector companies listed on the Indonesia Stock Exchange (IDX) during the 2020–2024 period. A quantitative approach was employed using secondary data and a purposive sampling technique, yielding 206 firm-year observations from 55 companies that satisfied the sampling criteria. Data were analyzed using panel data regression and Moderated Regression Analysis (MRA) with EViews 14. The results show that profitability has a positive and significant effect on stock returns, whereas the Interest Coverage Ratio, foreign ownership, and firm size (control variable) have no significant effect. Dividend policy fails to moderate the effects of profitability and foreign ownership on stock returns; however, it significantly moderates the effect of the Interest Coverage Ratio on stock returns in a negative direction. These findings indicate that profitability remains the fundamental signal investors rely on when evaluating energy sector stocks, whereas dividend policy plays a narrower role, limited to weakening the relationship between debt-servicing capacity and stock returns.