Dividend policy decision has a great influence on financial structure, flows of funds andrncorporate liquidity. However itâ€™s yet unresolved puzzle. This paper is an effort to revealrnthe insight dynamics that determine dividend payout with reference to Ethiopian insurancerncompanies on basis of data covers eight years (2007-2014) period. In light of priorrnliterature, key explanatory variables were identified to disclose their relationship andrninfluence on dividend payout. These variables are profitability, liquidity, leverage, firmâ€™srnsize, growth opportunity, lagged dividend payout ratio and business risk. The assumptionsrnneeded to be fulfilled for OLS were tested; the residual was found homoscedastic, free ofrnmulticollinearity, free of autocorrelation and normally distributed. Result using randomrneffect panel least square regression exhibited that profitability, liquidity, growthrnopportunity and lagged dividend payout ratio has a significant relationship with dividendrnpayout ratio. Also the study found that leverage, firm size and business risk were found tornbe insignificant in dividend payout decision of Ethiopian insurance companies. whilerndesigning their dividend payout policy board of directors and managers of insurancerncompanies need to consider the companyâ€™s profitability as it creates more cash inflowrnpotential, companyâ€™s liquidity position as inefficiency on it leads to decrease in profitability,rnthe companyâ€™s growth opportunity so as to be competent in the arena and the companyâ€™s pastrnyear dividend payment as dividend is the only means of return from investment and liquidityrnoption for shareholders in the absence of secondary stock market. On the same token investorsrnneed to consider profitability, liquidity, growth opportunity and previous year dividend in theirrninvestment decisions on Ethiopian insurance companies and to set their expectations.rnKey Words: dividend policy; dividend payout; insurance companies