5 Years Dividend Payment Review for NSE Quoted Companies


Monday, October 03, 2016 9.20am / Proshare Research

Executive Summary
To conservative income investors, dividend investing appears so simple, but it is not so. Dividend Investing requires good understanding of the technicalities involved as we would share in this report, and thus should be treated with every sense of responsibility. The most important thing to note in stock investment is that investors should not increase their exposure with dividend investing approach.

A cursory review of stocks listed on the Nigerian bourse between September 27, 2011 and September 27, 2016, revealed that Nigerian stocks had grown by 41%, thereby indicating an average of 8% yearly growth in the last five years. This suggests unimpressive outlook if we are to consider or juxtapose this with inflation figures within the same period under review.

Data from the inflation table above (as obtained from the National Bureau of Statistics) indicates that income investors', particularly the portfolios without diversification into fixed income assets, are not likely to be in good shape. 

This is not to discourage risk-averse investors from investing in the Nigerian stock market but to enlighten conservative income investors on the need to consider dividend consistency rate along with payout ratio and free cash-flow pattern in picking dividend-paying stocks. On this note, our report would focus on an analysis of the  dividend history and consistency rate of quoted companies in the last 5yrs.

Our analysis reveals that not much attention should be given to dividend yield, which is a function of price- the lower the price, the higher the yield. A better understanding of what drove price lower needs to be considered in picking dividend-paying stocks.

Having said that, the current state of the economy, that is, recession may incite companies to cut-down on dividend payout to investors, as a way of building up their retained earnings to weather the recession storm, which may make dividend stocks less attractive going forward.

Going by history, some large CAP companies had not only reduced payout ratio but nearly stopped paying dividends regularly, the recent real-example is FBN Holdings Plc. Though, no company is immune to industry and financial disaster, investors need to be wary of High dividend yield. Consistency rate, payout ratio and free cash-flow as revealed in this report should be taken as key indicators or compass hence forth.

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Do feel free to share your opinions/observations and feedback with us vide research@proshareng.com

Thank you.

For: Proshare Editorial Board

Olufemi AWOYEMI                                Reshu BAGGA
CEO Proshare                                                              COO Proshare 

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