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MTN Nigeria Maintains Conservative Dividend Policy as Earnings Surge

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MTN Nigeria Communications Plc, the largest telecommunications company by market capitalization in Africa’s largest economy, is gradually adopting a conservative dividend policy as it continues to leverage Nigeria’s huge population that craves for data usage to galvanize earnings.

The board of directors of the company has approved the payment of N120.09 billion dividends to its shareholders, which translates to N5.90k per every 2 kobo ordinary shares.

That translates to a pay out ratio of 60 percent, according to MoneyCentral calculations.

What this means is that the firm distributed N120.09 billion out of the N205.21 billion net income it generated for the year ended December 2020.

The dividend payout ratio is the ratio of the total amount of dividends paid out to shareholders relative to the net income of the company. It is the percentage of earnings paid to shareholders in dividends. The amount that is not paid to shareholders is retained by the company to pay off debt or to reinvest in core operations. It is sometimes simply referred to as the ‘payout ratio.’

Interestingly, the company will be retaining N85.12 billion to pay up its debt and fund future expansion with a view to magnifying its share of the Nigerian market.

A range of 35 percent to 55 percent is considered healthy and appropriate from a dividend investor’s point of view. A company that is likely to distribute roughly half of its earnings as dividends means that the company is well established and a leader in its industry.

Unlike consumer goods giant Nestle Nigeria that gives all earnings to shareholders or taps retain earnings for such distributions, MTN Nigeria has adopted a conservative policy even as it is growing earnings amid an unstable macroeconomic environment.

The company’s first quarter results were impressive, which its owners will be rewarded from distributable profits.

Revenue for voice data was up 42.83 percent to N105.70 billion in March 2021 from N74 billion the previous year. Revenue from voice increased by 7.51 percent to N208.62 billion.

Net income spiked by 42.52 percent to N73.74 billion in March 2021 from N51.74 billion the previous year while operating profit increased by 20.37 percent to N133.05 billion as at March 2021.

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