Some Nigerian stocks have continued to show potential for high dividend yields, as indicated by data from the companies’ financials, corporate disclosures, etc.
A recent analysis conducted by Nairametrics, focusing on dividend-paying companies, reveals that some of these companies offer attractive dividend yields.
Specifically, based on the analysis of dividends paid and share prices in the 2022 financial year, about 21 stocks offered dividend yields exceeding 10%.
These stocks span various sectors, including construction/real estate, services/transport-related, financial services, manufacturing, telecoms, and consumer goods.
For income-focused investors, stocks with a consistent track record of high dividend yields can be a promising investment strategy.
Understanding the Significance of Dividend Yields and Current Market Trends
While it is important to note that a high dividend yield does not always indicate attractive investment opportunities, as the yield may be elevated due to declining stock prices, it does indicate how much income an investment can generate relative to its current market price. When combined with capital gains, this gives a total return outlook for the stock.
- The dividend yield is a key financial ratio that reflects the annual dividend payments made by a company about its stock price.
- A higher dividend yield suggests a more attractive income stream from the investment.
- For the 2022 financial year, about 50% of Nigerian listed companies paid dividends, with many distributing both interim and final dividends.
- For the current year, several companies have already declared interim dividends for the 2023 financial year, with industry leaders such as Access Holding, Zenith Bank, UBA, MTN Nigeria, Custodian Investment, Seplat, and Nigerian Exchange Group taking the lead.
- This underscores the importance of careful analysis and a retrospective look at what the stock offered in prior years.
Investors who had positioned themselves in 2022 would have undoubtedly enjoyed impressive yields offered by these companies: Smart Products Nigeria, NAHCO, AXA Mansard, Access Holding, LASACO Insurance, UBA, GTCO, Zenith Bank, Total Energies, Okomu Oil, Berger Paints, and others, for the 2022 financial year.
Notable Performances and Growth Prospects of Specific Nigerian Companies
Smart Products Nigeria (SMURF) stock offered the highest dividend yield of 36.36% for the 2022 financial year. It means that its 2022 dividend yield was 36.36% at the closing price of N0.22.
- The company has been paying dividends for the past five years. Even though its dividend growth rate, as indicated by the compound annual growth rate, was -11.81%, dividend payments are covered by earnings as evidenced by a payout ratio of 59.17% in 2022.
- This accomplishment is notable, particularly in the face of an 18% year-over-year decline in net income in 2022
- Currently, the stock is trading at N0.20, representing a 9.09% year-to-date (YTD) decline in its share value, and it currently offers a dividend yield of 40%.
Nigerian Aviation Handling Co. (NAHCO) has a consistent track record of paying dividends for the past five years. In 2022, the stock offered an attractive dividend yield of 18.75%.
- What is especially noteworthy is the company’s impressive dividend growth rate, evidenced by a five-year compound annual growth rate (CAGR) of about 42%.
- The company’s financial performance in 2022 was impressive, marked by a substantial 247% year-over-year (YoY) growth in net income.
- This performance possibly led to an 87% dividend payout ratio for the same year.
- Currently, NAHCO’s stock is trading at N24 per share and has since gained 237% YtD.
- The significant growth in the share price, while beneficial for investors, has led to a decline in the stock’s dividend yield. However, the stock’s total return outlook, standing at 278%, presents a compelling investment case.
AXA Mansard’s stock provided an 18% dividend yield, primarily due to its significant payout. In 2022, the company distributed approximately 133% of its net income as dividends.
- This implies that investors who held the stock received 18% of their investment back as income in the form of dividends for each unit of the company’s stock price.
- The substantial rise in the payout ratio, coupled with a significant 34% drop in net income, suggests that the company might have exceeded its sustainable dividend capacity, putting its ability to maintain current dividend levels at risk
Access Holding Plc stock also offered a solid 17.65% dividend yield in 2022. This means that for every investor that held the stock, for every unit of the company’s stock price, they received a return of 17.65% in the form of dividends.
- The bank upheld a payout ratio of about 35% despite facing a 5% year-over-year (YoY) reduction in net income. Impressively, it managed to sustain a respectable dividend growth, evident in its 5-year Compound Annual Growth Rate (CAGR) of 29.81%.
- This year the share price has experienced substantial year-to-date (YTD) growth of about 85%, contributing to an overall total return of roughly 95%.
UBA, another Tier-1 bank, provided a dividend yield of 15% in 2022. The bank has a track record of delivering dividends consistently for the past five years, growing at a Compound Annual Growth Rate (CAGR) of 5.29%.
- Notably, in the previous year, UBA boosted its dividend payout by 10%, probably in response to a substantial 46% year-over-year (YoY) increase in net income.
- Currently, the stock is priced at N17.25, and it has achieved a substantial year-to-date (YtD) appreciation of about 127%, influencing the dividend yield to be at 8.16%.
Evaluating Dividend Yields in Context: Balancing Income and Capital Appreciation
Some other companies that have consistently paid dividends for the past five years that their stocks offered good dividend yield include GTCO (+13.5%), Zenith Bank (+13.3%), Total Energies (+12.95%), Okomu Oil (+12.73%), and Berger paints (+11.67%).
- Even though high dividend yields are attractive for income-oriented investors, it is important to consider the long-term growth prospects of the companies.
- Look for stocks that not only offer good dividend yields but also have the potential for capital appreciation.