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Monday, March 20, 2023

High Dividend Yield, Return on Equity Makes UBA Stock Investor’s Favorite

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United Bank for Africa (UBA) has got all that it takes to magnify investors’ earnings as the pan African lender’s stock is one of the most attractive among peers.

Interestingly, UBA pays a steady dividend that guarantees shareholders steady income and its strong capital position, consistent earnings growth coupled with good asset quality means it can weather economic downturn with reduced volatility.

It is important to note that the lender pays out higher dividends each year relative to its stock price compared to peer rivals, overtaking Zenith Bank in this regard.

Its dividend yield stood at 13.07 percent, and that compares with Zenith Bank, 11.52 percent; FBN Holdings Plc, 3.80 percent; Access Bank, 10.05 percent, and Guaranty Trust Holdings, 12.96 percent.

Also, UBA stock has the lowest Price to earnings ratio at 1.96 times, which means it is the cheapest stock among peers.

Zenith Bank has P/E Ratio of 3.34 times; FBN Holdings, 5.99 times, Guaranty Trust Holdings, 3.76 times, and 2.39 times.

The market downturn elicited by foreign investors’ apathy towards Nigeria’s equity due to the policy makers lack of transformation policies and capital controls have sent price earnings ratios down along with prices for stocks, indicating that good values for investors may be readily available on the market.

Additionally, the operating environment has been unfavorable as punitive regulations by the central bank such as the high cash reserve ratio and the barring of individuals and domestic firms from its Open Market Operations (OMO) are squeezing net interest margins and return on average equity.

Despite the tough and unpredictable macroeconomic environment, UBA’s profit before tax (PBT) grew by 20.21 percent to N153.07 billion in December 2021 from N127.57 billion the previous year.

Interest income on loans and advances increased by 12.12 percent to N473.90 billion from 422.65 billion the previous year.

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