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Friday, December 1, 2023

Fidelity is Best Dividend Paying Stock Among Peers

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Fidelity Bank is the best dividend paying stock among small and mid-sized lenders, providing investors with steady income.

The lender has a dividend yield of 9.87 percent, that compares with First City Monument Bank’s 4.90 percent; Union Bank, (4.20 percent); Sterling, (3.10 percent), and Stanbic IBTC Holdings, (8.89 percent).

Interestingly, Fidelity has been consistently rewarding shareholding from distributable profit for over 2 decades even amid incessant economic downturn.

As a Tier 2 lender who is more susceptible to macroeconomic headwinds and exposure to oil and gas, making such payment is a rare feat.

Dividend yield is the relationship between dividend per share and market price per share of a company. It is computed by dividing dividend per share by market price per share and multiplying the result by 100.

Dividend yield indicates the percentage return that investors get per share in the form of dividend by investing in shares of the company. Many investors prefer high dividend yield stocks as it provides periodic income to them, mostly on an annual basis. This is the reason high dividend yield stocks are also called as income stock

It is generally accepted corporate finance principles that investors like dividend paying stocks because it gives them the confidence that the company is of sound financial health.

However, the irrelevancy theorists believe there is no relationship between dividend and the stock price. They have a strong conviction that the value of a firm is a function of discounted cash flow streams.

This is logical because a firm could pay all earnings as dividend and source money from the capital or bond markets to fund expansion plans.

Better still the entity may decide not to even pay a dividend but reinvest it in the business for future expansion in such a way that delivers higher returns in the form of capital appreciation.

Berkshire Hathaway, one of the largest conglomerates in the world, does not pay dividends to its shareholders.

In particular, Buffett prefers to reinvest profits in the companies he controls in order to improve their efficiency, expand their reach, create new products and services, and improve existing ones.

Fidelity Bank paid N6.37 billion in 2020, and that is 15.17 percent higher than 2019’s N5.79 billion, according to MoneyCentral calculations.

Dividend payment to owners of the business surged 81.86 percent to N5.17 billion in 2019 from N3.18 billion as at December 2018.

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