Banks are set to increase their share of the NSE 30 Index’s dividends this year as consistent earnings growth could see them consolidate their position among the 30 largest listed firms on the stock market.
Lenders accounted for 64.2 percent of NSE 30 Index’s profits earned in the first nine months of 2017, up from 55.62 percent for all of 2016.
The trend will continue this year because they have stronger earnings and some of them have predictable pay-out ratio, according to Tajudeen Ibrahim, head of research at Chapel Hill Denham Limited.
“Some of them will have 18 percent, 20 percent and 30 pay-out ratio. When a firm pays fixed pay-out ratio irrespective of what they make, every year they have higher dividend in Naira terms, as long as earnings are rising,” said Ibrahim.
Zenith Bank, Guaranty Trust Bank (GTBank), First Bank Nigeria Holdings, Stanbic IBTC Holdings, United Bank for Africa (UBA) and Zenith Bank, paid out N178.83 billion (41.27 percent) of the total dividends of N428.35 billion paid by the NSE – 30 member firms to shareholders last year.
The payments were made when lenders generated 55.62 percent (N455.64 billion) of the total NSE – 30 profits of N819.09 billion made by the most liquid firms quoted on the floor of the bourse as at December 2016, according to data compiled by BusinessDay.
For dividends paid in 2016, banks made up about 37.95 percent (N162.51 billion) of the total dividends of N428.38 billion paid out by the NSE 30 Index firms.
The NSE – 30 tracks the top 30 listed firms on the Nigerian Stock Exchange (NSE) in terms of market capitalization and liquidity and accounts for about 94 percent of the stock markets N15.45 trillion total market capitalization.
Analysts say banks have cash to splash on owners because activities of the equity market has always been skewed to them as investors trade their shares more than any other sector.
Analysts see lenders seamlessly paying dividend for 2017 financial or increasing payout given their impressive performance, thanks to contributions from interest income on loans and advances and interest income on short term government securities.
The introduction of the Investors’ and Exporters’ (I&E) window by the central bank in April of last year was a boon for Nigerian banks.
Industrial goods firms were the second biggest dividend payer for the 2016 financial year (paid in 2017) with Dangote Cement and Lafarge Africa paying a combined dividend of N150.70 billion equivalent to 35.15 percent of NSE-30’s.
This was followed by consumer goods firms (Dangote Sugar, Dangote Flour Mills, Guinness, Nigerian Breweries, Nestle, Unilever and PZ), responsible for 16.18 percent of NSE-30 dividends in the period under review.
Oil and gas firms (Conoil, Mobil, and Total), had 1.95 percent of dividend paid by members of the index for the period.
There are indications that some firms may not reward owners of the business due to recurring losses in their books while others may cut down on payments.
The downstream oil and gas firms are grappling with cash flow problems brought on by delay in subsidy payments and a price cap on products set by the government.
Oando may be hindered from paying dividends due to accumulated losses of N254.40 billion in the balance sheet.
“Companies that have negative retained earnings are not expected to pay dividend because the laws prohibits such payment,” said Gloria Fadipe, Head of Research at CSL Research Limited.
BALA AUGIE
