The purpose of this study is to examine the relationship between shareholders wealth and dividend policy. Sample of 30 companies from Karachi stock exchange was selected which includes companies from textile, cement and chemical sector. Shareholders wealth is measured with the market price of shares. Dividend per share, retained earnings, lagged price and return on equity was used as independent variables. The estimation based on multiple regression model shows that there is strong relationship between shareholders wealth and dividend policy. The shareholders wealth is increase by dividend policy in case of Pakistan. Keywords: Market Price Per Share, Dividend Per Share, Return on Equity.