• Wednesday, July 24, 2024
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BusinessDay

Custodian rides on dividend surge, sustained profitability to join NSE 30 firms 

Insurance

The quest of Custodian Investment Plc, Nigeria’s most profitable publicly-owned insurance company, to maximise its shareholders’ wealth has earned it a spot among NSE 30 companies.

NSE 30 is the price index that tracks the top 30 companies in terms of market capitalisation and liquidity.

The Nigerian Stock Exchange (NSE) had in its biannual review of the index earlier this month announced the replacement of Dangote Flour Mills Plc with Custodian Investment Plc.

This implies Custodian Investment Plc is the only insurance firm among the 30 biggest companies on the local bourse despite Nigeria’s uninspiring insurance culture which hampers insurance firms from expanding business compared to peers in Africa.

Checks by BusinessDay revealed that the inclusion of the firm in NSE 30 Index largely came on the back of improved market value of Custodian Investment Plc.

The share price of the company’s stock had remained below N4.50 per share, but kicked off a bullish trend in end-March 2017 to hit its highest level of N6.80 since 2012 when BusinessDay started collating its data.

Also, the company consistently paid cash dividends to its shareholders since 2014, making it one of the best companies in the insurance sector that has been faithful in rewarding their owners using a portion of their net profits.

But beyond maintaining an impressive record of dividend pay-outs in the last five years, Custodian rewarded its owners with 32 kobo final dividend for the 2017 financial year, this represents an increase of more than three-quarters of 18 kobo paid a year earlier.

That was the game changer for the firm, even as major metrics used in measuring the firm’s financial performance improved. Profit margin stood at 16.98 percent as against 13.83 percent in the previous year.

Return on Asset, a profitability ratio that provides how much profit a company is able to generate from its assets, hit 9.04 percent in 2017 from 7.83 percent.

Also, the company showed improved efficiency in turning the cash put into the business into greater gains and growth as its return on equity rose to 19.92 percent in the year as against 17.71 percent recorded in 2016.

Custodian’s share price appreciated in value on the NSE by more than 20 percent to N4.96 per share a week from when it disclosed a final dividend payment of 32 kobo per share was proposed for its shareholders.

Consequently, the surge in dividend payment attracted investors to take strategic positions in the company, making it mark its best trading week in more than three years after the announcement. The stock gained as much as 15.35 percent during that week.

Custodian’s declared dividend for 2017 followed a 37.1 percent surge in its net income for the year to N7.31 billion as against a N5.33 billion achieved in the previous year, thanks to increases in its investment income and gross premium income on non-life insurance that made that happen.

Investment income comprises of dividend income, interest income as well as discounts on Treasury Bills and Bonds, according to the firm.

In spite of the dividend payment, the company was able to add over N5.43 billion to its retained earnings compared with N4.27 billion increment recorded in 2016, causing it to sustain its profitability in 2018 even though it fell 2.7 percent to N7.11 billion.

As a result, it paid 35 kobo in 2018, representing a 9 percent increase and a slower pace of dividend growth from 2017.

The company’s shares shed 1.61 percent to close at N6.1 on Friday, bringing its return since the start of the year to 8 percent and outperforming the NSE broad index which has lost 11 percent this year.

 

OLUWASEGUN OLAKOYENIKAN