Speculators defy profit guidance, hedge bet on dividend payout

Speculators who profit from fluctuations in the stock market are now raining billions of naira on value equities in anticipation of short-term returns accruable from full year dividend payout.

Also, these stock buyers are raising equities wager as signs of recovery in oil prices cushion their earlier concerns about the future of Africa’s biggest economy and risks of carrying naira asset classes amid a rising dollar.

Despite a bleak economy outlook, analysts say equities market sentiment remains positive, as attractive equities valuations appealed to investors hunting for bargains –which consequently drove the equity market higher.

Though a number of listed corporates indicated their full year 2015 earnings would be materially below  the preceding year’s feat, BusinessDay trend watch shows that increasing demand for their stocks has helped in shelving month-long sell-offs, as evidenced in about N400billion capital appreciation month-to-date (MtD).

“We anticipate demand for equities will remain strong in the near-term, as investors continue to speculate on attractive dividend payout ahead of the earnings season”, said the Kayode Tinuoye-led team of market analysts at Lagos-based United Capital plc. 

Brent crude oil was on track for its third weekly gain – up 1.2 percent at $40.52 a barrel last Friday –after a report by the International Energy Agency (IEA), which said production declines were picking up, less dramatic than expected.

“Whilst the potential for further profit-taking remains, we expect losses to be milder, as we anticipate an improvement in investor sentiment amid the continued rise in oil prices”, said analysts at Vetiva Capital Management Limited.

Before now companies like Courteville Business Solutions plc, FBN Holdings plc, Computer Warehouse Group plc, FCMB Group, and Diamond Bank plc issued profit warnings to shareholders–majority of these companies are linking their bleak full year earnings to the negative impact of worsening FX rates, and deteriorating Nigeria’s macro-economic conditions.

As the full year earnings season peaks, many investors leverage on ‘buy windows’ of opportunity created by companies from the period of announcement of dividend declaration to the days when the register of qualified shareholders for dividend payout are closed.

Dangote Cement plc proposed N8 dividend for the full year 2015 results; the company said it would close the register of its members between April 11 and 15, 2016. Month-to-date, the share price of Dangote Cement plc has risen from N148.83 to N164 as at last Friday.

The board of directors of Lafarge Africa plc will be meeting on March 16 to discuss the company’s full year results and dividend payment. Only this month, its share price has risen from N81.65 to N85.50.

Nigerian Breweries plc proposed N3.60kobo dividend and closed its registers for qualified shareholders last week. 

Forte Oil plc proposed N3.45kobo dividend payable on April 29 to shareholders whose names are in the company’s register as at close of business on April 15, 2016. The company’s share price moderated from N308.66 to N293.23 as Friday.

The board of directors of FBN Holdings plc is meeting next week Tuesday (March 22) to approve the company’s financials and its dividend recommendation. Its share price which stood at N3.84 as at March 1 closed at N3.69 last Friday.   

Iheanyi Nwachukwu