25 DIVIDEND STOCKS FOR 2015 PART 1
The equity market in 2014
had a little setback in terms of performances a result of many external and
internal factors that influenced it negatively to record two digits down. The bearishness of the market for a long
period had made the price to earnings ratio and dividend yield of many listed
stocks, including the blue chips, growth stocks and penny stocks attractive. The earnings power of the companies on the
exchange seems to be strong due to the low price regime that is currently in
the market. It is due to the liquidity problem resulting from foreign and
institutional investors’ exit from the market which in itself is due to the uncertainty
surrounding the February general elections.
It is also as a result of the dwindling external reserve that was
propelled by the free fall of crude oil price in the international market. The nation’s economic fundamentals have
changed with the low valuation in the market presently that brought about the new
stock market that needs new trading and investing approaches to stay ahead of
the market profitable. Dividend payment
in equity investment is as old as the stock market itself which is a function
of companies’ profitability at any given time.
The key to any successful portfolio is stable growth and additional
income from interim or full year dividends that gives investors the flexibility
to earn some cash for reinvestment or meet some needs. At this junction,
investors are advised not to overlook the opportunities for high dividend yield
in the market regardless of the expected dividend cut in some industries due to
one reason or the other. Looking at the table below, you will find that the
financial service providers topped and dominated the dividend yield column.
Financial
United Capital Plc
UBA Capital Plc, now
United Capital Plc, ranked first with a dividend yield of 15.24 percent at the
end of trading - 31st December, 2014.
This company is into investment banking, financial advisory service,
asset management and equity trading on the floor of the Nigerian Stock Exchange.
It was listed just two years ago. And within this short period it has increased
its capital base by way of right which diluted its earnings power as reflected
on the numbers posted in the just concluded financial year, compared with the 2013
figures. As a financial service provider, the possibility of increasing its
dividend payout for 2014 is very slim, looking at its third quarter EPS of 28
kobo and the 2013 financial year dividend of 25 kobo. Also, as a player in the
down market of 2014, a dividend cut to the range of 15 to 20 kobo is likely
which is also not bad considering its stock price. The company’s price to earnings of 3.42x is
attractive, indicating that the waiting period in this stock is short if the company’s
current earnings and price remain constant. Its earnings movement so far is
shown on the table as the market expects its full year result this quarter.
NPF
MICRO FINANCE BANK
The Nigerian Police Force Micro finance Bank was
in third position on the table, but second in the sector, with 12.50 percent
dividend yield as at the close of trading on the last day of 2014. This is a leading micro finance bank in its sub-sector with a focus on delivering satisfactory service to its police
community and other customers. The bank’s conservativeness and prudent
management have reflected on the numbers emanating from it as its third quarter EPS of 23 kobo is already higher than
the full year EPS of 17 kobo for 2013. Since the last four years when it was
listed on the exchange it has paid dividends consistently and made its report
available as at when due. On the strength of the expected full year earnings
projection of 25 kobo, the possibility of dividend increase in the range of 12
to 15 kobo is high. The current price to earnings ratio of 3.48x is attractive
FBN
HOLDINGS
This holding company occupied the forth position
in the market and third in its financial sector with a dividend yield of 12.50
percent. FBN Holding is a strong one-shop financial institution that is into
commercial banking, investment banking, insurance, registrar service and
mortgage. This bank ranks first in asset base, third in revenue, and third in
profitability as at third quarter earnings report of 2014 in its sub-sector
which is good. Prior to this time, it
has been regular in rewarding its shareholders and this trend is expected to
continue. Its dividend payout has increased in recent years but with a foreign
loan running in the bank, it means the cost of servicing the loan will increase
as a result of the devaluation of the naira which will further eat into the
company’s profit. CBN’s over-regulation and policy adjustment here and there have
influenced the banking industry’s performance as shown in the industry results.
The possibility of dividend cut is higher than dividend increase or same
dividend of the previous year. The stock trades at 5.18 times earnings and is
attractive for income investors and people playing it for long term.
FCMB
HOLDING
This is a holding company that is into commercial
banking, investment banking and securities trading with strong corporate,
retail and investment banking products that are driving the impressive numbers
being posted. Regardless of all the factors
militating against the bank, its earnings are robust to support its share price
for up potential and dividend payment. It is true that the bank also has
foreign loan that is running in it operation which will impact its bottom line
negatively due to increased cost of servicing the loan. Its recent third
quarter earnings to the market were fair as it posted 72 kobo EPS for an equity
selling below N2.50. This is good. The boost expected from the bank’s
acquisition Fin Bank has just started to reflect on its performance. A dividend of 25 kobo or above is possible
and would do wonders in that stock if finally announced. The equity is still
attractive enough to watch for investment, whether short, medium or long term. Technically,
the stock is at its oversold region and the signal for retracement is high. The
group’s price to earnings ratio of 3.46x and dividend yield of 12.05 per cent
are good and attractive.
ZENITH BANK
This bank is unique in its aggressive marketing,
relationship building with a strong ICT that is driving its business to rank as
the 6th biggest in the continent. On the strength of the third
quarter earnings report of the bank in its sub-sector, it has ranked first in
gross income, profitability and net asset. The highest dividend was paid by the
bank in 2014 with a strong return on investment. It has consistently grown its
earnings on quarterly and yearly bases to support its increasing dividend
payout for the years. This stock is trading at 8.15 times earnings with a
dividend yield of 9.51 per cent. This is good and attractive for income investors
that want regular flow into their account from their investment. It also
operates branches outside the country with strong technology and competent
personnel. The possibility of dividend cut in 2015 is higher than dividend
increase as all the banks are looking at increasing their operating capital.
Investors should expect same dividend for 2013 or less. For trading, the stock
is attractive with good up potential after the prevailing situation that had
depressed the market.
GTBANK
This bank provides financial services to Nigeria with
branches outside the shore of the country. It currently has an asset
base of over N2 trillion and shareholders’ funds of over N200 billion. Its corporate banking
preference and strong service culture have enabled it record consistent year on
year growth in customers’ base and these have impacted on its bottom line to
support its dividend payout policy. Its strong professionalism in operations and
good technology have helped in delivering satisfactory services to its customers
at all times. The bank ranks best in return on equity, second I n profitability
and forth in net asset in its industry. It has consistently paid dividends in
the last five years. The stock trades at 11.09 times earnings and a yield of
6.01 per cent. For capital protection and regular dividend look the ways of
this equity.The bank has strong up potential from the current position it is
selling. Its pattern of dividend payment and holding structure has equally
supported its share price. The possibility of dividend increase is slim.
UBA
This bank, in recent time, has emerged in the sixth position
in terms of profitability level in its sector. This was attributed to its
increasing African subsidiary network that is contributing more than 20 percent
to the bank’s profit. The bank is not
consistent in dividend payment as a result of undulating earnings’ performance.
Its performance in recent time shows a dwindling earnings power which can be
attributed to pressure from the CBN policy adjustment which ranges from
increasing public and private sector CRR, hike in MPR to others. On the
strength of the bank’s third quarter EPS of 102 kobo, the likelihood of
dividend in the range of 30 to 35 kobo is high and anything closer to the
figure paid last year will be as a result of its shareholding structure. It’s
currently trading at 4.22 times earnings with a yield of 11.63 per cent. As the
bank is currently sourcing for additional fund to boost its operation through
right issue, its earnings and future performance are expected to improve.
Income and growth investors should keep their gaze on the stock.
AFRICA PRUDENRIAL
This company is a leading share registration service
provider in Nigeria. It is the only share registrar company
listed on the exchange two years ago and it delighted its shareholders with
first dividend of 35 kobo from a full year’s earnings power of 68 kobo. For the last financial year of which audited
report is expected in the market in this quarter, the company’s performance has
been impressive as it earnings(EPS) moved from 11 kobo in the first quarter to
24 kobo in second quarter and 40 kobo in third quarter, representing more than
80 percent growth in each quarter. On the strength of the numbers posted so far
and the stock market where it plays, the expected EPS is projected to be in the
region of 57 kobo, and a dividend possibility of 25 to 30 kobo is high. Its
earnings are relatively strong regardless of its increased outstanding number
of share as a result its last right issue. The stock trades at 7.60 times
earnings and a yield of 11.51per cent. For capital appreciation and growth
stock, look the way of this equity. This is the only company playing the investment
world with free money.
Continues next week. For comments or questions email: ambrose.o@investdataonline.com
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