If you have been following the Nigerian Stock market lately then by now you’d know stocks have been so beaten down many of them are trading at multi year lows. In fact, some are so cheap they post double digit earnings yields. This suggest if they pay anything close to dividend paid in 2014 this year, then we might see dividend yields better treasury bill rates. Sadly, though some analysts believe that won’t happen. The concensus is that dividend will not be ‘spectacular’ this year. But why is that? The Nation interviewed some analysts and this is what they all had to say;
Head, research and intelligence, BGL Plc, Mr. Femi Ademola said there were no strong prospects for any major increase in dividend payouts in the immediate period given the performance of the companies as shown by interim results released so far.
According to him, 2014 was not a very strong year in terms of corporate performance and as such there is no expectation of a spectacular performance from listed companies more than what was experienced in the previous year.
Ademola noted that regulatory rules, poor power supply, crude oil price crisis and insecurity had combined to weaken corporate performance.
“Regulatory headwinds in the banking sector would only allow modest growth in earnings if at all for 2014 while disruptions to energy source would affect performance of companies involved in industrial goods. Oil companies face the problems with oil price decline despite growing expenses,” Ademola said.
He however noted that consumer goods companies are expected to outperform other sectors in terms of dividend payouts.
Group head, research, Lead Capital Plc, Mr. Sadiq Waziri, said the current high lending rates and devaluation of the national currency would undermine returns to investors.
He said dividends and returns to investors, especially real returns, may be poor given the economic situation under which companies are operating.
Managing director, Finawell Capital Limited, Mr. Tunde Oyekunle, however noted that the current bearishness may result in high dividend yield for investors, although corporate performance may be low.
According to him, expectation on corporate earnings should be a little above average in respect of dividend yield since most stocks are currently trading above their intrinsic value. However, while dividend yield may be, total earnings may be equivalent to or drop slightly below the performance in 2013.