The discussion this morning is on dividend yield which is the returns share shareholders expect on their investments. It also shows how much a firm pays out as dividend each year relative to its share price.
The focus of the discussion of our analysis this morning is centred on the dividend yield of the Nigeria cement makers.
A high dividend yield can be considered to be evidence that a stock has been under priced or the company has fallen on hard times or that future dividend may not be as high as the previous ones.
Similarly, a low dividend yield may mean that stocks are overpriced or that future dividend might be higher.
Some investors may find a higher dividend yield attractive as an aid to marketing a fund to retail investors. In the contrary, some investors may find a higher dividend yield unattractive, perhaps it increases their tax bill.
Dangote Cement Plc, the largest cement maker in sub Sahara Africa had a dividend yield (EY) of 3.09 percent.
Its investment or market value of N3.83 trillion earning a yield of 3.09 percent produces total annual dividend income of N118.47 billion. Its yield is the second highest among its peers.
The average revenue growth over the last three years has been 5 percent while average net income growth over the same period is 20.22 percent.
Lafarge Africa Plc recorded a DY of 2.86 percent as its stock price rose faster than dividend payment.
The annual dividend income from its investment or market value of N346.53 billion yielding 2.86 percent is N9.87 billion.
It recorded an average revenue growth of 9.03 percent in the past 3 years just as net income over the same period surged 36.11 percent.
Ashaka cement Plc recorded the lowest return on stock with as DY was 1.28 percent as stock price ballooned more than income payment.
Its investment of N73.67 billion earning a yield of 1.28 percent produces an annual dividend income of N931.62 million.
The company recorded an average revenue growth of 0.3 percent over the past three years while average net income spiked 135.25 percent.
Cement Company of Northern Nigeria (CCNN) recorded the highest dividend yield of 4.86 percent. It investment of market capitalization of N18.09 billion yielding 4.86 percent produces annual dividend income of N868.57 million.
Its average revenue growth of the past three years was 8.01 percent while the average net income has been soaring by 61.60 percent.
Conclusions
The issue of dividend yield still remains debatable in the investment world as analysts say a DY between 4 percent and 6 percent is within rage.
Cumulative dividend payment income of the four cement makers stood at N130.14 billion with Dangote having over 91.1 percent of the total figure while average DY for the industry is 3.07 percent.
Investors are attracted to firms that pay steady dividend as they view this as a sign of financial strength and stability.
Patrick Atuanya and Bala Augie
