The recent capital flight from the equity market into the money market and bond market occasioned by improved yields in the fixed income space has been responsible for the current bearish trend in the market.
Investors will continue to move their resources from the equity market into those markets so long the rates are attractive. It is believed that the money market and bond market space for now is more preferable. That the share prices of equities are coming down is nothing unexpected.
Going by the improved rates in the money market and bond market, then the equity market will still come down as investors will continue to take profit in order to take position where their bread is well buttered.
Capital Market analysts have explained that the market seems to be establishing a new trend as it has been observed that the market in 2019 and 2020, January came with gain and February eroded the entire gains. History repeated itself again in 2021, just like the two previous years where gains of January was eroded in February.
A few more results of quoted firms were released last week and more would still come in the coming week. Stocks that have declared dividend so far are Zenith Bank, United Capital, MTN, Custodian Investment, Nestle, NASCON Allied Industries, Seplat, Dangote Sugar, Africa Prudential Plc and Ardova Plc.
We still have to remain in the capital market, if not for anything but for the dividend yield.
Stocks to Watch
“We should look at those stocks that are likely to pay good dividend; that is stocks that will give dividend yield of 7% and above.
- Dangote Cement: One of the stocks that we are expecting a very high dividend is Dangote Cement. If you look at the price of Cement in the country is going up. There is no way it is not beneficial to the share price of the stock. Now that they have reduced their number of issued share capital. So whatever dividend they have is for the few and therefore they are expected to pay much higher than the N16 dividend they declared last year. Don’t forget that this is the company that did not pay interim dividend.
- Bank Stocks: Even though Guaranty Trust Bank paid interim dividend, we are expecting them to follow the suit of Zenith Bank in terms of dividend pay-out. We are hopeful that stocks like UBA, Access Bank and First Bank of Nigeria Holdings will do better than the previous year in terms of dividend pay-out. Banking sector is one of the sector that we should pay attention more.
- In the agricultural sector, we are expecting Okomu and Presco to do well.
- Nestle paid more than what they earned; and this have to do with the policy of 2020 which allows you to dip into your reserve and pay if you are cash buoyant. So we expect many other multinationals may likely take advantage of that policy and take from their share reserve to pay more dividend than what the previously paid as we witnessed in Nestle.
- Oando: We are hoping that with the outcome of the court judgement as regards their case with SEC, Oando will come out and declare their AGM; and they should know that this is the time to reward the shareholders for being patient. The price of crude oil is going up. They are entering the contract of gas pipe line from Ajaokuta to Kaduna, and they are receiving their money in dollars. Therefore, they know that the shareholders have been loyal to them and patient for them and this is the time to reward.
- Chams Plc paid dividend of 3 kobo. It is currently trading at 20 kobo. If a stock pays you 3 kobo and trades at 20 kobo, the dividend yield is about 15%. If they can sustain that one, it will raise hope for the stock.
- Insurance Firms: We still have hope in the Insurance companies because of their bonuses. Quite a number of them are declaring bonuses even though there is share reconstruction, but if you do the needful you will find out that you are better off. AXA Mansard gave bonus of 17 for every 7. It was marked down at 64 kobo. Today it is trading at about 104 kobo. The price appreciation is more than 50%. Insurance companies is one of the sectors that we are hopeful, that even if they don’t pay dividend, they are likely to give bonus; though you cannot rule out reconstruction. But if you do the needful, you will be better off.
- We have some hope in PZ. They are in profit and we are expecting them to reward the shareholders.
- UACN in 2019 declared loss, yet paid 50 kobo dividend. But now that they have earn more than N1, we are expecting their dividend to improve than that of last year.