Nigeria’s largest companies could pay their shareholders N914.46 billion out of distributable profit in 2021 based on current dividend yields if they maintain payout levels for the prior year as a gradual economic recovery has been underpinning earnings.
Dividends were arrived at by multiplying the yields by the market price per share and multiplying the results by total ordinary shares.
The performance of the dividend paying stocks or Nigerian blue-chip NGX 50 index (the list of the largest and most liquid firms) has been on the upswing following the reopening of business activities.
Of course, as the economy improves dividend payers tend to do better in both price and dividend terms.
On the other hand, in a recession, companies would flex their dividend cover and dividend would reduce much less than profits.
In line with MoneyCentral expectations, real GDP grew by 4.03% year on year (yoy) in the third quarter of the year.
The GDP growth was lower than the 5.01 percent yoy growth reported in the second quarter (Q2-2021), according to a recent report by the National Bureau of Statistics.
Interestingly, the NGX All-Share Index (NGX-ASI) closed higher by 1.1% w/w to print at 42,716.4 points, bringing the YTD return to 6.1% while market capitalization gained N471.4bn to hit N22.3tn.
Despite inflationary pressures, foreign exchange crisis, and deteriorating infrastructure, and punitive regulatory environment, net profit margin of 30 most liquid and capitalised companies increased to 16.94 percent in September 2021 from 13.84 percent as at September 2020, according to MoneyCentral calculations.
Combined profit after tax otherwise known as net income spiked by 30.60 percent to N1.50 trillion in September 2021 from N1.15 trillion the previous year.
Their cumulative revenue followed the same growth trajectory as it grew by 18.63 percent to N8.67 trillion in the period under review from N7.30 trillion the previous year.
Dividend-paying stocks always attract investors as this acts as a steady source of income. Most of the time, cash dividends return more than what can be earned from deposits in savings accounts.
So, astute investors who put their money where their mouth is always focus on dividend yield (annual dividend per share/stock’s price) as this reflects the percentage return on the invested amount. However, as the dividend yield is based on the stock’s price performance, a lower share price indicates a higher yield, making the stock attractive.
“I think Guaranty Trust Holdings, Zenith Bank, and Access will maintain payout for the prior year as earnings have not been too impressive,’’ said Gbolahan Ologunro, equity research analyst at Cordros Securities.
“We may see a surprise cut back on payout for Stanbic IBTC Holdings as its earnings slid sharply,” said Ologunro.
Zenith Bank, Access Bank, Dangote Sugar, Fidelity Bank, BUA Cement are the best dividend paying stocks on the index, an attractive entry for investors who crave for additional income.
Zenith Bank dividend yield of 12.30 percent, which is the most attractive on the NGX 50 index, means the lender could pay its shareholders N95.58 billion in dividend for 2021 financial year. Though the figure could be slightly higher or lower depending on the movement of share price.
Dangote Cement, the most capitalised firm in Nigeria, has a yield of 6.35 percent and N272.67 billion could be dished out from distributed profit to compensate owners who have invested their money in the firm.
MTN Nigeria’s dividend yield of 5.38 percent generated a dividend of N212.47 billion.
Shareholders of Nestle Nigeria, the largest consumer goods firm by market capitalisation, could pay a dividend of N47.49 billion based on the current yield of 4.28 percent.
Access Bank has a yield of 9.60 percent that generated a dividend of N30.71 billion. Lafarge Africa’s dividend yield of 8.55 percent produced a dividend 0f N33.05 billion.
BUA Cement has a dividend yield of 3.08 percent that produced a total dividend of N62.93 billion.
Seplat Energies, the largest indigenous oil and firms in Africa’s largest economy that has reverted to the path of profitability and solid cash-flow position has a dividend yield of 6.62 percent and N25.69 billion dividend could go to the pockets of shareholders.
The outlook for 2022 is propitious as the rebound in crude oil price and the successful implementation of the 2022 budget are expected to support corporate earnings, but the country’s inflationary pressures and huge total debt remains a concern.
Global oil benchmark Brent earlier on Tuesday surpassed $80, its highest since November.