The NGX All-Share Index (ASI) dropped from 40% gain in Q1 to 34% in the first half and then to 29% as of August 2024, indicating a period of volatility in the Nigerian stock market. As a result, investors need to pay close attention to dividend income, which is a crucial component of total return.
Among the market’s falling trend, four businesses stand out with double-digit dividend yields, providing appealing returns for income-focused investors and boosting total returns.
These firms—Smart Products Nigeria Plc, UBA, Access Holdings, and Zenith Bank—have excellent fundamentals and the greatest dividend yields, making them equities to keep an eye on for investors looking for consistent income.
These equities had the greatest trailing dividend yields, ranging from 10% to 40%, as of August 2024, when trading ended.
The dividend yields of several of the top-performing companies—Julu Plc, Oando, RT Briscoe, Julius Berger, Veritas, Presco, Geregu, and BUA Foods—which had triple-digit share price gains as of this date are lower, ranging from 0.00% to 6%.
On the other hand, despite YtD share price reductions (except from Smart Products, which saw a flat YtD increase), the high dividend-yielding stocks, Zenith Bank, UBA, Access Holdings, and Smart Products Nigeria Plc, continue to offer substantial income potential through dividends.
This indicates that income-focused investors continue to find these firms appealing despite the pressure on share prices, underscoring the need of taking into account both dividend yield and share price performance when assessing overall returns.
Zenith Bank Plc (Dividend Return: 10.46%)
For investors that prioritise income, Zenith Bank continues to be a desirable choice, as evidenced by its trailing dividend yield of 10.46%. Although the share price has lost 1.03% year-to-date (YtD), its strong dividend yield has increased its total return to 9.42%.
For the previous five years, Zenith Bank has regularly increased its dividends; in 2023, it will increase its dividend per share (DPS) by 25% to N4 per share. Even if the payout ratio dropped from 45% in 2022 to 18.55%, it’s possible that the bank intentionally withheld earnings in order to reward shareholders while fostering growth.
Zenith Bank, one of the wealthiest financial organisations in Nigeria, is producing impressive outcomes. The bank reported a record profit after tax (PAT) of N677 billion in 2023, driven by a strong operating cash flow of N1.79 trillion and N1.2 trillion in retained earnings. In 2023, earnings per share (EPS) increased by 202%, beating the 38% compound annual growth rate (CAGR) during the previous three years.
This trend has continued into 2024, with profit after tax already surpassing 83% of the full-year 2023 total by the middle of the year at N578 billion.
To further demonstrate its dedication to shareholders, Zenith Bank further raised its interim dividend from N0.30 in the first half of 2023 to N1 in the first half of 2024.
In spite of the minor decline in the YtD share price of 1.03%, Zenith Bank’s overall return of 9.42% demonstrates its capacity to handle market difficulties. With a beta of 0.836 and a price-to-earnings (P/E) ratio of 1.36, the company offers a stable return profile while posing a moderate risk. Strong financial performance combined with its steady dividend payments makes it a desirable choice for investors looking for income and stability in a tumultuous market.
Access Holding Plc (Dividend Return: 11.05%)
Another strong performer for dividend investors is Access Holdings, which has a trailing dividend yield of 11.05%. Despite the stock’s 17.93% year-to-date loss, investors seeking stable income may find it appealing due to its solid dividend payment history.
Even though Access Holdings’ payout ratio dropped to 12% in 2023, the company nevertheless raised its dividend by 40%.
The bank’s cash flow from operations was N1.88 trillion in 2023, and as of Q1 2024, its retained earnings were N884.9 billion. This shows that Access Holdings will have enough of room to continue paying dividends or raise them in the near future.
Furthermore, despite the recent decline in the share price, its earnings per share (EPS) increased by 288% to N4.35 in the first quarter of 2024, suggesting solid underlying company success.
With a low beta of 0.655 and a low price-to-earnings (P/E) ratio of 0.96x, Access Holdings looks cheap and has less volatility in comparison to the market as a whole.
Because of this combination, Access Holdings becomes a desirable choice for investors who are risk conservative and want to potentially increase their wealth while still earning income. The stock had a noteworthy year-over-year rise of 172% in 2023, which was indicative of its robust performance before the current market crisis.
Strong fundamentals for the stock point to the potential for price growth when the market breaks its gloomy trend. Its investment appeal is further increased by anticipations of a possible dividend increase in the upcoming first half of 2024 results, expanding on the 30 kobo interim dividend given in the first half of 2023.
UBA (Dividend Return: 12.20%)
With a trailing dividend yield of 12.20%, UBA comes in first place. Long-term income investors find UBA to be a compelling option due to its steady dividend payments, even with a 7.99% year-to-date (YtD) share price decline.
With a total return of 249.70% in 2023, UBA demonstrated both great operational and financial performance.
Dividend per share (DPS) at UBA increased to N2.80 in 2023, a 155% increase. The bank showed promise for both income and capital gains when the market stabilised, as seen by its sharp rise in cash flow from operations to N3.32 trillion and its 261% growth in earnings per share (EPS). In 2023, UBA’s share price showed a 2338% year-over-year growth, demonstrating its strong success.
Considering its 1.18x comparatively low earnings multiple and 0.524 stock beta, UBA is cheap and has less volatility than the market as a whole. Because of these factors together, it’s a very attractive option for risk-averse investors looking for consistent dividend income.
A N0.50 interim dividend was given by the bank for the first half of 2023. A possible dividend increase is anticipated as investors wait for the first half of 2024 results; this might further bolster investor confidence and help buck the present gloomy trend.
Smart Products Nigeria Plc (Dividend Return: 40%)
Smart Products Nigeria Plc, which has the highest dividend yield on the NGX at 40%, is at the top of the list.
This yield is calculated using the company’s 8 kobo dividend per share and the August 2024 share price of N0.20. The company’s financial performance paints a mixed picture despite this alluring dividend.
Smart Products’ net operating cash flow was N28 million in 2023, and the company’s profit after tax increased just little to N6.59 million. The payout ratio of the corporation dropped from 74% in 2022 to 54.67% in 2023, suggesting a more conservative strategy to sustain the high dividend return.
Operating in the specialised real estate leasing market, Smart Products specialises in long-term warehouse leases throughout Nigeria. Although this gives the company steady cash flows to fund its large dividends, its meagre profitability raises questions about whether it can continue to pay out such large dividends in the long run.
Due to its high dividend yield, Smart Products Nigeria Plc is a good choice for investors who are interested in income. Its moderate growth and financial results, however, call for cautious evaluation with regard to its long-term dividend sustainability.
