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Friday, March 31, 2023

Dangote Sugar Leads Pack as Best Consumer Goods Stock

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While consumer spending is forecast to remain subdued on the back of macroeconomic headwinds, the margins of Dangote Sugar Refinery are expected to remain resilient as it is able to take much higher price increases than peers.

That means this stock should be added to the portfolio of savvy investors as the company has an attractive valuation, which means it can outperform the broad market this year, according to MoneyCentral’s analysis of firms in the sector.

Dangote Sugar Refinery (DSR) is a value stock, and the fact that it produces essential items gives it the leeway to ride out of an economic downturn.

A value stock refers to shares of a company that appears to trade at a lower price relative to its fundamentals, such as dividends, earnings, or sales, making it appealing to value investors.

A value stock is trading at levels that are perceived to be below its fundamentals.

The above is true about the largest producer of the sweetener in Africa’s largest economy that has been delivering higher returns to its shareholders. For instance, it is the highest paying dividend stock in the consumer goods industry.

Dangote Sugar has a dividend yield of 8.47 percent, and that compares with Flour Mills Nigeria (4.71 percent); Nigerian Breweries, (1.61 percent); Nestle, (4.32 percent), and Cadbury (2.21 percent).

The dividend yield, expressed as a percentage, is a financial ratio (dividend/price) that shows how much a company pays out in dividends each year relative to its stock price.

Its low price to earnings ratio reiterates the attractiveness of the stocks.

DSR trades at 7.26 times earnings, that compares with peer rivals that are ridiculously overpriced. Nestle has a price to earnings ratio of (63.18 percent); Nigerian Breweries, (63.18 percent); Cadbury, (84.43 percent); Nascon Allied, (8.36 percent), and Honeywell, (16.46 percent).

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