Nigerian investors looking to dividend as a sign of higher share price valuation may have to rethink that strategy. This is because we are in a market with a new set of rules.
Historically, Most Blue Chip Nigerian stocks have always been considered attractive at a dividend yield of about 5%. That yield was considered acceptable and as such company’s with conservative dividend policy target this yield as a ceiling. Things are however changing as the value of Nigerian stocks continue to plummet despite a string of resilient results.
As bad as the economy is some stocks have actually posted profits and declared dividends that is at worst in line with the dividend per share reported a year earlier. Some of these companies have also gone ahead to pay dividend twice (interim and final). In times past this was a sign that the bulls are coming. Currently, it’s probably a sign of a smokescreen.
Even a GTB at a 10.66% dividend yield is no longer attractive to investors. After the company declared an impressive profit on Monday, the share price only gained 2.2%! Dangote Cement at 5% did not bring as much traction compared to when the yield was just 2.5%. The share price displayed bullish trend before hitting a resistance of about N166. What about Africa Prudentials? At a yield of about 14% investors seem to see no further upside on the other side of N3.3.
One would think there are more competing yields out there? Treasury Bills yield are below 7% whilst bond yields remain just about 12%. Equities seem ripe for the taking but investors are having none of it. An attractive dividend yield is viewed as a bull trap by some investors. Some analysts believe the message is probably different. The market maybe yearning for a dividend yield of 20% and above! Who says that is impossible?