In the world of investing, few metrics spark as much interest as the dividend payout ratio.
This figure reveals how much of a company’s profit after tax (PAT) is returned to shareholders as dividends.
A high payout ratio indicates a focus on rewarding shareholders, while a low ratio suggests that management is reinvesting profits to fuel future growth.
In 2024, Nigerian companies have been notably generous with their payouts, especially in the manufacturing sector, while the banking sector has adopted a more conservative stance.
Manufacturers leading the way
Nigerian manufacturers are leading the charge with some of the highest payout ratios in the market.
Companies like Dangote Cement, BUA Cement, BUA Foods, and others have not only paid substantial dividends but have returned nearly all their net profits to shareholders.
This trend reflects the firms’ commitment to rewarding investors, but it also raises questions about their strategies for reinvestment and growth.
Dangote Cement:
Topping the list is Dangote Cement, which declared a dividend of N30 per share in 2024, amounting to N502.6 billion, or 99.87% of its N503.25 billion profit after tax.
This follows a similar trend in 2023, where the company paid out N502.6 billion from a profit of N455.58 billion, leading to a payout ratio of 110.32%.
Despite these high payouts, Dangote Cement’s retained earnings remain strong, at N1.027 trillion, and it continues to generate robust cash flows.
The stock offers a 6.25% dividend yield, though its share price growth has been modest at just 0.25% in 2024.
BUA Cement:
BUA Cement also made a substantial payout in 2024, with a dividend of N2.05 per share, amounting to N69.42 billion.
This corresponds to a payout ratio of 93.93%, continuing its trend of aggressive shareholder returns.
Over 96% of BUA Cement’s shares are controlled by its founder, Abdul Samad Rabiu, and his holding company, BUA Industries. This means that the majority of the payout flows back to the controlling shareholders.
Despite this, the company’s financials are strong, and its dividend policy signals confidence in its cash position.
However, its stock price has seen a 10% decline year-to-date, trading at N83.70, and the stock offers a dividend yield of 2.45
BUA Foods:
BUA Foods has also been generous with its payouts. In 2024, the company declared a dividend of N13 per share, totaling N234 billion, or 88% of its N266 billion profit after tax.
This is a significant increase from the N99 billion paid out in 2023, signaling that the company is committed to rewarding its shareholders.
However, BUA Foods’ stock has been relatively flat, with a modest 0.72% gain year-to-date, and offers a dividend yield of 3.11%.
Like BUA Cement, the company’s ownership is concentrated in the hands of a few, with 95.26% of shares held by insiders.
Retained earnings, however, continue to grow, signaling that BUA Foods is not compromising its long-term financial position.
Geregu Power:
Geregu Power, an energy company, has also positioned itself as a high dividend payout player.
In 2024, the company increased its dividend to N8.50 per share, translating to a total payout of N21.25 billion, or 77.35% of its N27.43 billion profit after tax.
This follows a more aggressive payout in 2023, when the company paid out N8 per share, a total of N20 billion, which was more than its net income of N16.05 billion, resulting in a payout ratio of 125%.
The share price has lost 0.74% of its value, YtD and offers a dividend yield of 0.74%
Geregu Power is majorly owned by Amperion Power Distribution Company Limited, which holds 95.4% of the company’s shares.
The remaining 4.6% is held by other institutional and retail investors.
Africa Prudential Plc:
Africa Prudential Plc also kept to its dividend tradition in 2024, proposing a final dividend of N0.60 per share, bringing its total payout for the year to N0.75 per share, which represents a 68.39% payout ratio according to the notes to its 2024 financial statements.
While its stock price has struggled, down 33.25% year-to-date, the company’s dividend yield of 5.49% offers some comfort to income-focused investors despite the price slide.
The conservative banking sector
In contrast to the manufacturing sector, the banking sector has been far more conservative with its dividend payouts.
Fidelity Bank, the highest-ranking bank in terms of payout ratio, recorded a payout ratio of just 32.35% in 2024. Other banks like GTCO, UBA, and Zenith Bank have seen their payout ratios hover in the 4% to 30% range.
While these banks remain consistent in paying dividends, their relatively low payout ratios suggest a strategy focused on maintaining financial stability.
Importantly, the bank stocks offer a high dividend yield between 3% to as high as 16%
Overall, in 2024, Nigerian companies, particularly manufacturers like Dangote Cement, BUA Cement, and BUA Foods, have demonstrated a clear commitment to rewarding shareholders with substantial dividend payouts.
While these high payout ratios indicate strong cash flows and a focus on shareholder returns, they also raise questions about long-term growth and reinvestment strategies.
On the other hand, banks have adopted a more conservative stance, prioritizing capital preservation.
For investors, these varying payout ratios offer a mix of opportunities, depending on their investment goals, whether they seek immediate income or long-term capital appreciation.
Regardless of the strategy, Nigerian companies are showing resilience and a strong commitment to shareholder value amid challenging macroeconomic conditions.
