This thesis examines the relationship between financial leverage and dividend policy of 20 companies, listed with Pakistan Stock Exchange during the period 2011 to 2016.Secondary data was collected from annual and financial reports of individual companies for six years thus complete business cycle.Data of interest was extracted, and analyzed using SPSS Version 16.0.Dividend policy, vastly followed by the companies, was tested by applying the extended model of Linter (1956) with the debt ratio of the firm, the previous years dividend yield as its independent variables and change in earnings as a dummy variable.At first, the descriptive statistics for our entire variables were calculated and then correlation matrix was calculated to identify the preliminary relationship among all the variables, followed by regression analysis on panel data to examine the significance between the dependent and independent.Theoretical assertions were justified through model that the level of corporate debt (leverage) and widely practiced dividend policy, significantly,affect the dividend policy of the Pakistani firms.On the other hand, financial leverage was found to have from the findings, the study revealed that there exists a negative impact on dividend per share, indicating less dividend payments by highdebt finns.The findings also revealed/confirmed that change in earnings has no significant impact on dividend policy in case of Pakistani finns while the dividend yield has positive impact and vice versa.The model, applied for the study, supports only the significant effect of dividend yield on dividend per share.