4 BANK STOCKS WITH NO DIVIDEND IN 2015

Income investors looking for dividend stocks to play in the banking sub-sector of financial service of the market in 2015 regardless of valuation and price appreciation should look away from some banking stocks especially now that the sector non-performing loan is on the increase as a result of banks facilities to the, power, oil and gas sector in form of loans of different categories which has exposed many banks to higher provision at the end of 2014 financial year. Also coupled the financial institutions that had foreign loans they are servicing in order to keep their operation robust have more interest to pay as CBN have devalued naira and hike the MPR to 13 percent which all these will eat into the banks profitability which will  incapacitate some bank ability to pay dividend.  The banks’ total operating expenses increased to N1.87 trillion in 2013 from N1.19 trillion in 2012 and this has continued in 2014. The increase in banks cost of doing business in 2013 impacted negatively on return on assets, (ROA), return on equity (ROE) as well as yield on earning assets (YEA) as all declined during the period from 22.2 percent, 2.62 percent and 12.13 percent in 2012 to 19.14 percent, 2.15 percent, 11.19 percent, respectively, according to statistics from the Nigeria Deposit Insurance Corporation (NDIC).  The third quarter results of the banks were below market expectation as many posted lower numbers compared to the previous year figures which is a reflection of over-regulation, huge cost burden  and others like insecurities in some part of the country, low disposable income of the banking public.  On this light expect dividend cut or flat payment  from the banks that will pay dividend for the financial year that just  ended December 31, while the possibility of the banks below to pay is slim or zero, so for dividend income avoid them for now no matter how you love the stocks because no income will come from them.

WEMA BANK

This bank had actually demonstrated strength in the market for the year 2014 regardless of the prolonged bear market it share price had relatively remained stable as the bank moved from its red position to profitability with improved numbers for same period. It had not paid dividend to its shareholders for the last five years due to unimpressive performance and change of operational license to regional bank. Even with the last successful private placement of the bank the possibility of dividend payment for 2014 financial year is slim as the bank current earnings did not support payment of any sort for now. Income investors looking for dividend income stock for 2015 should away from the bank stock for now.  The bank currently has the highest price to earnings ratio as it is trading 15 times earnings with market capitalization of N38.30 billion.  The bank earnings per share for 2014 move from first quarter 3 kobo to 4 kobo in second quarter representing 33 percent growth, while the third quarter EPS stood at 6 kobo recording 50 percent increased. The expected full year earnings is projected to be in the region of 7 kobo which did not support dividend.

SKYE BANK

This bank in recent years has consistently decline in performance as a result of frequent change in the bank leadership and poor corporate governance which started affecting the bank since three years ago. The recent acquisition of mainstreet bank with over N126 billion which is 4 times higher than the bank market capitalization and marginally above its net assets. Looking at the bank books it’s obvious that  the funds for the transaction was not from the bank and at the same time the cost of integrating the two banks operation will at this stage further beat down the banks profitability level. The impact of the bank expansion will not be immediately but later this year or 2016. On the strength of development in the bank and the numbers, the possibility of dividend from this bank in 2015 is slim or zero, meaning income investors should keep away. This bank has also not be regular in dividend payment for last five years. It’s currently trading at 2.96 times earnings with a yield of 13.23 per cent. For dividend income investors, they should not look the way of the stock for dividend. Yes, numbers posted for the 2014 were relatively strong at the current price, but the expected provisions for non-performing loans and the acquisition of mainstreet bank will put pressure on its earnings. The bank has market capitalization of N30.40 billion.

UBN

Union Bank had deny investor’s dividend for more than four years now due to the banks negative retained earnings and operating cash flow of N260.79 billion and N79.33 billion respectively as at third quarter earnings position of the bank. The recapitalization of the bank to reposition its operation has not pull the bank out of this red position.  The restructuring currently going on in the bank as professionals from top banks are joining to revitalize the whole system will not change things immediately. It’s currently trading at 16.42 times of earnings which is the highest in its sector as at third quarter earnings report. It has consistently not paid dividends in the last five years. Income investors looking for dividend stock in the financial service sector of the market should look away from this equity for 2015. The bank market capitalization is N145.65 billion now while it retained earnings is negative N260.79 billion.

UNITY BANK

Since recapitalization of the banking sector that infused many banks to form this Unity bank, its performance in terms of price and earnings have been unstable regardless of reforms upon reforms in its industry since them. The bank has been foot-dragging with change of management and over bloated shares issue despite reconstruction with its right issue and private placement, the bank outstanding share is above 100 billion shares. No matter its earnings the bank shares in issue will dilute the EPS at the end of the day. With the anticipated increased in the non-performing loans of banks which this bank has its own share no matter how little it is and the negative retained earnings that is above N 47. 61 billion. Looking at the bank earnings movement for 2014 financial year the possibility of dividend is slim or zero, on this note income investors playing the market now for dividend income as the market look into its earnings season should avoid unity bank for 2015. The bank’s negative net operating cash flow of N30.45 billion  did not support dividend payment at this point.