For dividend investors and those looking for high yield, high dividend yielding stocks provide good alternatives to bonds and bond funds. The search for high dividend stocks gets more desperate as falling interest rates make fixed income securities less attractive. High dividend stocks may not be easy to find, but sometimes, gold could be found in the least of places. One seemingly unknown stock that has consistently provided investors with high dividend yield is Smart Products Nig. Plc, (Bloomberg: SMURFIT).
Smart Products Nigeria Plc is in the business of processing of palm kernel oil in Nigeria. The stock has a price earnings ratio of 2.28, price to book ratio of .2143 and price to sales ratio of .5039, according to Bloomberg.com. In 2014, the company posted a 5.18% growth in profit before tax, which also increased by 32% in 2015 over the 2014 performance but in 2017, it suffered a 51% decrease in profit before tax which fell from N19.9 million in 2016 to N9.7 million in 2017, a reflection of the decrease in gross revenue from 49.8 million in 2016 to N43.8 million in 2017. Each share of the stock currently sells for 44 kobo
Though the fundamentals do not seem to be in favour of the company, its dividend history and dividend yield makes it the best dividend yielding company in Nigeria. Inspite of the dismal performance in 2017, the company has been consistent in its dividend policy. In 2015, the company paid total dividend of 25 kobo per share giving it a dividend yield of 23.36%, the second best in 2015 as RAK Unity Petroleum company took the first position.
In 2016, Smart Products Nig. Plc made a dividend payment of 26 kobo per share which resulted in a dividend yield of 24.3%, the best among Nigerian equities that year.
That feat was repeated in 2017 when the company paid total dividend of 23 kobo, producing 41.67% in dividend yield.
So far in 2018, the company has declared total dividend of 20 kobo per share resulting in a dividend yield of 45.45%. which again is the best among Nigerian equities.
Why Dividend Yield is important
Dividend yield is important because it helps investors to find out how much money they will earn from one stock versus other dividend paying stocks. For example, at a price of 54 kobo per share before Smart Products’ shares went ex-dividend, you could buy 1,000 shares with N540 (excluding commissions) and that would have entitled you to the 20K dividend resulting in you getting N200 dividend. Compare that to buying Okomu Oil Palm that sold at about N83 per share prior to going ex. At that price, N540 would get you about 6 shares. The last dividend declared by Okomu Oil Palm was for N3 per share and that would have given you just N18 dividend. So, if you are a dividend investor, you would have made over N180 more in Smart Products than in Okomu Oil palm with an investment of N540.
It is worthy of note that while dividend yield is a good decision variable for choosing which stocks to buy, it should not be the only variable. Attention should be given to the fundamentals of any company you are investigating as well as other dividend driven metrics like payout ratio and dividend growth rate.