At the beginning of each year, it is customary in almost all endeavours of life to take stock and ponder on the events that happened in the previous year as a basis for mapping out strategies for the future. One stock that is worth taking, especially if you are a dividend investor, is the analysis of the previous year’s dividend payments, with a view to uncovering the yields and growth.
What Are Dividends?
Dividends are a form of corporate action and like many corporate actions, depend on the discretion of a company’s board of directors. Because of that discretion, dividends can grow, remain constant or even decrease depending on what a company’s board decides. Most analysts agree that dividends tend to give signals to investors about the feelings of the board about the financial health of a company.
Although there are the dividend irrelevant theorists that disagree that dividends have any useful information for investment decision making. Most of the time, dividend growth signals that a company is in good health and investors seem to like companies that pay increasing numbers of dividends each year. Dividend growth also signals corporate management or the board of directors’ faith and confidence in the financial wellbeing of a company.
Dividend Stocks Can Shield You from Market Volatility
The stock market so far this year has been anything but stellar. The NSE Allshare index lost 4,588.43 points in 2019 to record a year to date return -14.60%, ending 2019 at 26,842.07 points after closing the previous year, 2018, at 31,430.50 points. The market had been volatile at times with lots of ups and downs. The Quantitative Financial Analytics Realized Volatility Index, which opened the year at 15.51, fell to 8.64 on August 10th after reaching an all-year high of 23.75 on January 26.
That index was moderated considerably in the months of November and December to end the year at 9.66 points. Given these market ups and downs that experts call volatility, investors may be better off looking for ways to hedge against such gyrations and their impact on investment portfolios.
Market volatility is not new, and it is not unique to Nigerian market, it is all over the world, and investors the world over, oftentimes look to dividend stocks as a way to hedge their bets.
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In addition to being a steady source of income, dividends help cushion or insulate investors from falling stock prices or portfolio losses. This is even more so when investors increase their holdings through dividend reinvestment plans or by merely reinvesting their dividends.
Here is a list of companies that grew their dividends in 2019, according to analysis by Quantitative Financial Analytics based on the corporate action data published by the Nigeria Stock Exchange.
The data revealed that 29 companies in Nigeria declared and/or paid more dividend per share in 2019 than they did in 2018.
Greater Than 100% Dividend Growth
Only two companies grew their dividends by more than 100%: Unilever Nigeria Plc, which grew its 2019 dividend by 200% over the 2018 number, and Red Star Express, which grew 2019 dividend by 115%. In 2018, Unilever paid N0.5 per share dividend, but in 2019, it paid N1.5 per share. Red Star Express paid N0.4 per share dividend in 2018 while it paid N0.86 per share in 2019.
Exactly 100% Dividend Growth
Julius Berger and B O C Gases Nigeria plc both doubled their dividend rates in 2019 compared to what was paid in 2018. Julius Berger, which had paid N1 per share in 2018 is paying N2 per share in 2019 while B O C Gasses is paying N0.4 per share in 2019 after paying N0.2 per share in 2018.
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Conclusion
Though, dividend growth rate has not been very consistent in Nigeria, it is imperative that investors, especially income or dividend investors, pay attention to those companies that grow their dividends year by year. .
This analysis is very insightful and valuable to investors. How do we get in-depth data as to why these companies perform wonderfully.
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