Superstar stocks giving the best return to shareholders

by | April 23, 2018 2:05 am



It is generally accepted that a progressive dividend payment is positive for the stock market.

This is because investors and shareholders have a perception that dividend paying stocks are a sign of financial strength.

But Modigliani and Miller in their 1950 irrelevance theory opined that there are no relations between dividends and market share.

We are not discussing corporate finance here but taking a cursory look at superstar stocks that have given the best returns to shareholders.

We have decided to compare the dividend yield (DY) of companies to  the average of the industry in which they belong. If a firm’s DY exceeds the average or bench mark, it means the firm has given more returns to shareholders for taking risk in its equity position.

Out of 13 firms under coverage, only 6 outperform the industry average hence superstar stocks.

In the Fast Moving Consumer Goods Sector, GlaxoSmithKline’s and Nascon Allied Industries DY of 22.06 percent and 7.14 percent outperform the industry average of 6.07 percent.

In the banking sector, Zenith Bank, Guaranty Trust Bank (GTBank), and United Bank for Africa (UBA) have a DY of 8.36 percent, 5.36 percent, 5.53 percent respectively, outperforming the industry average of 4.75 percent.

Total Nigeria was a lone achiever in the oil and gas segment as its D.Y of 5.62 percent exceeded the 4.90 percent industry average.

 

Dividend yield is the financial ratio that measures the quantum of cash dividends paid out to shareholders relative to the market value per share. It is computed by dividing the dividend per share by the market price per share and multiplying the result by 100.

A company with a high dividend yield pays a substantial share of its profits in the form of dividends.

 

Firms have given investors a potential adrenalin boost of as much as N434.15 billion in final dividends for 2017 financial year as more pay-outsare expected this week following the release of more results.

A total of 33 companies have declared the intentions of rewardingshareholders.

 

Zenith Bank, United Bank for Africa (UBA), Access Bank, GTBank and Stabic IBTC have announced a combined final dividend of N186.68 billion, which is 45.31 percent of the total figure of N412.96 billion.

Nestle Nigeria Plc’s increased dividend payment by 175.12 percent to N21.79 billion in the period under review as the consumer goods giant’s full year earnings 2017 surged by 325.53 percent to N33.72 billion.

Analysts are of the view that the increased dividend payment by corporates is a reflection of an improved economy since they operate within the same environment.

“All parameters are indicating an improvement in the economy, that is, Gross Domestic Product (GDP), Purchasing Managers Index (PMI).These parameters are expected to impact positively on the performance of firms,” said Johnson Chukwu, managing director and CEO of Cowry Assets Management Limited.

“As the economy improves further one should expect that it impacts on the fortunes of firms,” said Chukwu.

The gross domestic product of Africa’s largest oil producer expanded for three straight quarters last year after a 1.6 percent contraction in 2016, with year-on-year growth reaching 1.9 percent in the final three months of 2017.

An increase in crude prices and the introduction of a new foreign-exchange system that ended a crippling shortage of dollars helped attract more investment flows into the country, while improving liquidity for the nation’s companies.

Dangote Cement’s N178.15 billion final dividend payments to shareholders for the year 2017 make up 41.01percent of the total figure of N434.15 billion, based on BusinessDay calculations.

The largest producer of the building material has increased payment by 23.52 percent as full year net income increased by 31 percent while sales were up 7 percent.

 

Firms’ DY

 Stocks DY (%) N’000
GSK 22.05            9,000,000,000
Zenith Bank 8.36          76,930,000,000
Nascon Allied Industries Plc 7.14            3,975,000,000
Total Nigeria 5.62            4,753,280,000
UBA 5.53          22,230,000,000
GTBank 5.36          70,632,000,000
Vitafoam Nigeria Plc 4.76                156,000,000
11 Plc (formerly Mobil Oil Nig.) 4.3            2,880,000,000
Access Bank Plc 3.5          11,572,000,000
Nigerian Breweries 3.18                  25,040,000
Dangote Sugar Refinery Plc 2.29          15,000,000,000
Cadbury Plc 1.06                300,800,000
Stanbic IBTC Holdings Plc 1.03            5,250,000,000

Source: Companies Financials; BusinessDay MI

 

BALA AUGIE