Nigeria’s largest brewer, Nigerian Breweries plans to pay out about 100% of its 2021 full-year profits as dividends. This is contained in the latest dividend announcements made by the company last week.
Nigeria Breweries announced it will be paying out a total dividend of N12.9 billion out of its 2021 full year profits of N12.6 billion representing a dividend payout ratio of just over 100%. The dividend being paid comes to about N1.6 per share.
The company is however only going to pay about N9.6 billion on April 22nd this year if it is approved by its shareholders. This is because it had already paid out N3.2 billion in interim dividends back in October.
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Why this is important
It is not often that a company pays out its full year profits as dividends due to the need to retain some cash for investment purposes.
- Incidentally, Nigeria Breweries is one of the very few stocks that has had a recent history of paying out all of its profits as dividends.
- The company achieved a 153%, 116% and 191% dividend payouts ratio for the years 2018, 2019, and 2020 respectively.
- With the N12.9 billion in dividends paid out in 2021, Nigeria Breweries has now paid out about N75.3 billion out of profits of N55.5 billion in that period.
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Despite the huge dividend payout, Nigeria Breweries still has one of the lowest returns on average equity in the industry posting 4.5% and 7.6% in 2020 and 2021 respectively. A major factor for this is also the high level of retained earnings held by the company.
Nigeria Breweries has about N90 billion in retained earnings and another N77.4 billion in share premium taking its total shareholder’s equity to N171.8 billion. However, most of the equity is locked up in property plants and equipment which the company is not sweating enough to generate the right returns. This is buttressed by a return on asset of just 2.7% in 2021.
Is Nigeria Breweries a buy?
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