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Saturday, June 10, 2023

Dividend Heavyweights Battle: MTN Nigeria vs. GTB

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MTN Nigeria (MTNN) and Guaranty Trust Bank (GTB) are two of the most blue chip stocks listed on the Nigerian Stock Exchange (NSE), so which of these two should an investor solely focused on dividends buy?.
They are also quite liquid meaning investors can get in and out without fearing for lack of buyers or sellers.
Average rolling 30-Day daily trading volume for MTNN is 1.95 million shares equivalent to an average daily value traded of N230 million using the last closing price of N118 per share.
For GTB which trades an average of 31.5 million shares a day, daily value would equal N787.5 million using Wednesdays closing price of N25 per share.
MTN Nigeria has a market capitalisation of N2.4 trillion, compared to N735.7 billion for GTB.
GTB has sold off from a lofty valuation of 2 times book value and currently trades close to the bottom of its valuation range at 1.13 times book value.
MTNN for its part has also sold off from a 52 week high of N146.8 per share, reached shortly after its listing on the Nigerian Stock Exchange (NSE) last year to N118 it closed trading at yesterday.
It currently trades at a modest 11.7 times trailing earnings never mind that earnings grew at a 39 percent clip in 2019.
So if one is just into the best Dividend Play and not looking at potential Capital gains, which of these 2 heavy weights offers the best value right now?
For our Thesis we would assume Dividend pay-outs by both firms for 2020 will remain at worst at 2019 levels.
MTN Nigeria paid a total dividend of N7.92 for 2019, compared to GTB which paid total dividends of N2.80 per share in 2019.
On face value it would look like MTNN was the better value play.
However, investors need to understand the concept of yield when deciding on what stock to buy purely for dividends.
The dividend yield represents the ratio of a company’s current annual dividend compared to its current share price. The dividend yield tells you the most efficient way to earn a return.
Using this methodology, it shows that MTNN has a current dividend yield of 6.7 percent, while GTB sports a yield of 11.2 percent.
Therefore, as of today, for this battle of Dividend Heavyweights, GTB has emerged the winner.

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