- Nigerian companies have been able to declare higher dividends despite the economic headwinds in 2022.
- The dividend payout of N1.4 trillion represents an 11.5% increase from the previous year, and 85% of the total dividends paid out were by the top 10 companies.
- While some of the largest Nigerian companies performed well in 2022, the dividend outlook for 2023 is uncertain due to challenges such as high inflation, slow GDP growth rate, and limited room for price increases.
Despite the challenging macroeconomic climate in 2022, some of Nigeria’s largest companies have announced a dividend payout of N1.4 trillion to their shareholders for the financial year that ended on December 31, 2022. This represents an 11.5% increase from the N1.3 trillion proposed by these companies in the 2021 financial year.
Nairametrics assessed the published audited accounts of about 25 companies that have released their audited accounts and have their financial year-end on December 31st. Some of the companies surveyed included NGX30 such as Dangote Cement Plc, MTN Nigeria Communication, Zenith Bank Plc, Access Bank, BUA Cement Plc, BUA Foods, and Airtel Africa.
Others include Nestle, Stanbic IBTC, UBA, Seplat Energy, WAPCO, Okomu Oil, Dangote Sugar Refinery, Nigerian Breweries Plc, United Capital, Flour Mills Nigeria Plc, and Ecobank Transnational Incorporated. While Total, FCMB Group, Custodian Investment, TRANSCORP, and Unilever Nigeria Plc also made the list of companies assessed.
Higher dividends despite economic headwinds
The Nigerian economy experienced economic challenges in 2022 as exchange rate depreciation, galloping inflation, and a hotly contested election created operational headwinds for most businesses. During the year, the exchange rate went from N580/$1 to as high as N800/$1, and the exchange rate closed at a 15-year high of 21.34, having opened the year at about 15.6%.
The galloping inflation forced the central bank to adopt a hawkish monetary policy, increasing its benchmark MPR from 11.5% to about 17% (currently 18%). The result is a potential increase in borrowing costs for most of the companies under review, which should affect their ability to reward shareholders.
However, the companies mostly reported higher profits despite incurring significantly higher cost pressures. To deliver higher profits, most of the companies had to rely on price increases to absorb increasing operating costs. This strategy helped deliver a combined profit surge of about N2.59 trillion in 2022, representing a 16.6% increase from the N2.2 trillion reported a year earlier.
It is from this profit that the companies proposed a total dividend of N1.4 trillion out of their profits or an equivalent of 56% dividend payout ratio. In Nigeria, dividends are either paid out of the current year’s profits or from retained earnings (prior profits). Most of the companies under review declared dividends out of their current profits.
The government also stands to earn about N140 billion or 10% of the dividends declared via statutory withholding tax deductions.
Stocks rewarding shareholders
Asides from dividends, investors on the exchange also recorded capital appreciation from their investments on the exchange. The NSE 30 index which most of the stocks belong to report a gain of 6.98% in 2022.
As of April 14, 2022, their return is 0.98% compared to the All Share Index gain of 1.25%.In terms of dividend yield, the market capitalization of the companies under review was estimated at about N24.7 trillion as of the 18th of April 2023.
This will take the dividend yield paid out by NGX 30 companies to about 5.6% for 2022.
Companies that led dividend payout
The top 10 companies on our list paid out a combined N1.2 trillion in dividends during the year or 85% of the total dividends paid out. Dangote Cement, MTN, and Zenith Bank led the top three payers. BUA Cement and GTCO make up 4th and 5th respectively. BUA Group which includes the food and cement businesses have a combined dividend of N175 billion which will take it to 3rd place.
Dangote Cement remained the leading company on the NGX30 with the highest dividend payout to shareholders.
- Between 2020 and 2022, it has paid shareholders a total dividend of about N954.26 billion and has been able to grow its dividend payout over the past three years by 7.72% per year.
- The share price currently offers a dividend yield of 7.41% and a YTD capital gain of 3.45%, ranking it 10th and 16th, respectively, on the NGX30.
MTN Nigeria declared a sum of N317.53 billion in dividends in 2022, representing an 18.90% increase from N267.05 billion in 2021. Compared to Dangote Cement, its share price currently offers a lower dividend yield (+6.96%).
Third on the list is Zenith Bank Plc, which increased its payout by 3.23% to N100.5 billion in 2022. Unlike Dangote Cement and MTN Nigeria with an average higher payout ratio between 87% – 91%, Zenith Bank paid out about 45% of its earnings, but its share price currently offers the highest dividend yield (+14.65%).
The information in this article suggests that despite the economic challenges faced by Nigeria in 2022, some of the country’s largest companies were still able to report higher profits and increase their dividend payouts to shareholders. This is a positive sign for the Nigerian economy as it shows that some sectors of the economy are still able to perform well despite the challenging macroeconomic environment.
However, the dividend outlook for 2023 remains uncertain as the Nigerian economy faces higher inflation, a slow GDP growth rate of 3.6%, exchange rate pressures, and limited room for price increases. Companies may have to rely on cost-cutting measures, borrowing, or tapping into their retained earnings to maintain or increase dividend payouts.
Additionally, factors such as government policies, global economic conditions, and industry-specific factors could also impact the dividend outlook. It will be important to monitor these factors and the financial performance of the companies in order to get a better understanding of the dividend outlook for 2023.
While the top-performing companies, including Dangote Cement, MTN, and Zenith Bank, have consistently rewarded shareholders, the uncertain economic conditions may make it challenging for companies to maintain high dividend payouts in 2023.