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…Access, Zenith, UBA, United Capital have most attractive yield
Dividend payments by Nigerian companies rose 21.82 percent to a record high of N1.10 trillion in 2022, according to data gathered by MoneyCentral.
Nearly every company on the NGXASI 30 index increased their payments or held them steady as they sought to attract new and maintain current investors.
Most investors perceive that when Nigerian companies pay dividend it demonstrates financial strength and stable earnings needed to withstand macroeconomic shocks that are sometimes unexpected.
Dangote Cement Plc, the most capitalised firm and the largest producer of the building material in Africa’s largest economy, will pay its owners N340.81 billion in 2022.
Other generous dividend paying firms are: MTN Nigeria Communication Plc, (N203.54 billion); BUA Cement Plc, (N94.82 billion); Zenith Bank Plc, (N91.04 billion); Guaranty Trust Holding Company, (N82.40 billion); Access Bank, (N46.20 billion), and Nestle Nigeria, (N28.93 billion).
Guinness Nigeria hiked its payment by 1,452 percent to N15.63 billion in 2022 from N1 billion in 2021.
Access Bank, UBA, Zenith, United Capital, GTCO, Lafarge Africa, and TotalEnergies have the most attractive dividend yields at 14.78 percent, 14.10, 14.04 percent, 12.61 percent, 12.47 percent, 12.24 percent, and 12.61 percent respectively at May 1, 2023.
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.
The reciprocal of the dividend yield is the total dividends paid/net income which is the dividend payout ratio.
Some non-financial firms have an aggressive dividend policy as evidenced in a high payout ratio because there are no regulatory caps on the amount that they can distribute to their owners.
For instance, Nestle Foods has a dividend payout ratio of 81.74 percent, whilst Nigerian breweries’ payout stood at 93.17 percent, according to MoneyCentral calculations.
The dividend payout ratio can be a helpful metric for comparing dividend stocks. This ratio represents the amount of net income that a company pays out to shareholders in the form of dividends.
Rising interest rate on the back of central bank’s tightening regime to tame stubborn inflation exacerbated by the Russia and Ukraine war, a hike in the price of key products, and higher crude oil price underpinned earnings that paved the way for banks and non-financial firms to maintain steady dividend distribution.
However, big banks saw slow growth at the bottom line (profit) due to impairment on Ghana debt crisis and the good news is that such an event may not recur again as it is one off, but analysts say lenders will have to recapitalise their Ghana operations to avoid a high write off.
The combined net income of the 30 most capitalised and liquid firms otherwise known as the NGXASI 30 index increased by 10.01 percent to N2.47 trillion in December 2022 from N2.46 trillion as at December 2021, according to data gathered by MoneyCentral.
The Central Bank of Nigeria raised its monetary policy rate to 18% from 17.5% in its February 2023 meeting, marking the second interest rate hike in 2023.
The country’ inflation rate rose to 22.04% in March 2023, the highest since 2009, according to a recent Consumer Price Index report released by the National Bureau of Statistics (NBS).
The Nigeria 10-year government bond has a 14.450 percent yield, according to data from World Government Bonds (WGB).
It appears 2023 is going to be a tough year for corporate Nigerians as first quarter results for some firms have been disappointing so far.
A major concern is that companies are finding it difficult passing on rising input costs to consumers who are reeling from inflationary pressures, high transport fare, and rising utility bills in a country where the vast majority are unemployed and wallowing in poverty.
Of course, there are expectations of suppressed valuation as rising interest rates are jerking up borrowing costs which is detrimental to entities who are paying more to service interest on debt.
Nigerian Breweries suffered its first loss in more than a decade while Nestle and Guinness earnings also fell off the cliff.
The NGXASI index has a price to earnings ratio of 10 times as at May 3 ,2023.