- Mixed outlook as stocks may be marked down for dividends
The Nigerian stock market has been upbeat since the beginning of the year as it has consistently returned positive Month on Month. Coupled with impressive Q4 results published by quoted firms, the dividend pay-out by some of these companies have also triggered price growth in most stocks.
As expected, the deadline for release of audited results is 31 March 2022. This implies that we should expect more corporate actions from dividend paying stocks. Just like we have always said on this platform that “expectation is the mother of all investment strategies”. This means that investors can take position in stocks that are still expected to declared dividends for their 2021 financial year.
Commenting on the market outlook, the MD/CEO of APT Securities and Funds Limited, Mallam Garba Kurfi, opined a mixed expectation for the market in the coming weeks as the prices of some stocks may be marked down for dividend.
The Capital Market guru stated thus:
“If some stocks are marked down for dividend, it will bring down market capitalisation. They may recover and some may not. If they recover, at best we break even. If they do not recover, then we are in for it.
Most of the companies have released their results. The only very few we are waiting for are Fidelity, FCMB, Access Bank, First Bank and Stanbic.
The market marginally gained last week. If there is no heavy markdown, the market can continue to gain marginally.
Most stocks that have released there result have not been adequately rewarded. For instance the price of GTCO, Zenith, UBA and Lafarge that declared dividend are supposed to be trading better than what they are currently trading. We are not surprised because the major liquidity provider are either foreign investors or the institutional investors.
Most of the institutional investors are Pension Funds Administrators and they are positioned for dividends. There dividend is free from withholding tax. They get their dividend intact unlike retail investors whose dividend attracts withholding tax. So most PFAs hold their position to get dividends. Some of this dividend are double digits in terms of yield.
If you invest in a company and you get up to 11%- 12% dividend yield within a short period, why won’t you go for it? If you go to the bond or money market, that is the rate you will get for the whole year. So because of that, most of the institutional investors are not selling.
The foreign investors because of the difficulty in FOREX stopped playing our market the previous year. So in terms of participation, the local investors participate in the market more that foreign investors. Therefore there is no much liquidity.
My major concern is that of the primary elections of the PDP and APC which must come on or before the end of June. If they handle it peacefully and successfully, the sky will be the limit for our market. If the primary elections go the other way with arguments and court cases, it will affect the market; because the market look at the future. If they have appointed the right candidate in the primaries, it will attract reliability in the market”.
STOCKS TO WATCH
FIDELITY BANK
The Unaudited Financial Statements of Fidelity Bank for 2021 financial year show significant growth in the Bank’s top line and bottom line.
Fidelity Bank reported the Gross Earnings of N75.092 billion, up by 46.74% from N51.174 billion reported the previous year.
Profit after tax grew by 85.97% to N11.612 billion from N6.244 billion reported the previous year.
Earnings per share increased year on year by 85.97% to 40 kobo from the EPS of 22 kobo reported in Q4 2020.
Fidelity Bank paid 22 kobo dividend the previous year. There is possibility that that bank will increase their dividend payout for the year under review, based on the growth in their earnings per share.
FCMB
First City Monument Bank in its Q4 2021 result achieved year on year growth in its top line and bottom line figures.
Gross Earnings of N208.528 billion was reported for the 12 months period, up by 4.56% from N199.439 billion reported the previous year.
Profit after tax grew year on year by 6.54% to N20.89 billion from N19.61 billion reported the previous year.
Earnings per share of FCMB Group for the period under review stands at N1.06, up by 6.54% from the EPS of N0.99 achieved the previous year.
FCMB paid 15 kobo in FY 2020. There is possibility of increase in dividend payout for 2021 financial year.
JULIUS BERGER
The turnover of Julius Berger in Q4 2021 grew year on year by 40.45% from N241.779 billion to N339.581 billion.
The company grew its profit after tax by 657.35% to N9.363 billion from N1.236 billion.
Earnings per share increased by 657.35 to N5.85 from the EPS of N0.77 achieved the previous year.
The construction giant paid a final dividend of 40 kobo with bonus issue for 2020 financial year. There is possibility of increased dividend pay-out by Julius Berger in FY 2021.
FIDSON
Fidson Healthcare in its Q4 2021 financial report achieved significant growth in its top line and bottom line figures.
A turnover of N30.743 billion was reported for the 12 months period, up by 68.22% from N18.276 billion reported the previous year.
Profit after tax grew by 155.52% to N3.079 billion from N1.205 billion profit reported the previous year.
Earnings per share of Fidson increased to N1.48 from the EPS of N0.58. This translates to 155.52% growth year on year.
Fidson paid a final dividend of 25 kobo from the EPS of 58 kobo. Based on the improved earnings of the company, there is possibility of increased dividend payout in FY 2021.
OKOMU
The Q4 2021 result of Okomu Oil shows significant growth in the company’s topline and bottom line figures.
A turnover of N37.457 billion was reported for the 12 months period, up by 60% from N23.411 billion reported the previous year.
Profit after tax grew by 80.50% to N14.043 billion from 7.781 billion reported the previous year.
Earnings per share of Okomu increased by 80.50% to N14.72 from the EPS of N8.16 reported the previous year.
Okomu paid N7 dividend in 2020 year end from the earnings per share of N8.16. Based on its Q4 2021 earnings per share of N14.72, the Company is likely to increase their dividend pay-out in FY 2021.
PRESCO
Presco is yet to release its result to the market. From all indication, the result is bound to be good as their recent corporate disclosure hinted that the board will meet to approve its Audited Financial Statement for 2021 and payment of dividend.
Presco paid N2 as final dividend in 2020 year end. They have already paid an interim of N1 for year 2021.
We expect an improved final dividend pay-out for FY 2021 from Presco
ACCESS
The market is anticipating the result of Access Bank and it is expected to be good, based on its consistently impressive Q1, Q2 and Q3 earnings in 2021.
The Bank increased its interim dividend pay out to 30 kobo from 25 kobo. This implies that there is tendency for them to increase their final dividend pay-out.
FBNH
The share price of FBNH closed at N11.55. It has gone as far N12.90 in the past 52 weeks. A position in FBNH has an uptrend potential of N10.47% relative to its year high of N12.90.
First Bank paid 45 kobo dividend for the year end 2020. There is every possibility that the Big Elephant will increase their dividend payout for 2021 financial year.
With the book value of N20.99, relative to its current share price of N11.25, FBNH is considered cheap.
BUA CEMENT
BUA Cement in Q4 2021 increased their turnover and profit after tax by 22.87% and 22.81% respectively.
Earnings per share increased year on year by 22.81% to N2.71 from the EPS of N2.14 achieved in 2020 year end.
The Cement manufacturer paid a final dividend of N2.067 for 2020 year end. The Company is likely to pay the same dividend it paid the previous year.