It’s happening! The return on one year government Treasury bills have now fallen below the dividend yield of some of Nigeria’s biggest banks.
Extrapolating from dividend paid in 2018, Zenith bank boasts the highest dividend yield among big banks at around 17 percent, some 700 basis points above the 10 percent stop rate for one-year treasury bills at last Wednesday’s primary auction and 600 basis points above inflation.
Zenith’s superior returns have certainly caught the eye of investors who bought a record N5.9 billion worth of the tier-one lender’s shares last Wednesday alone, the most in the last seven trading days at least.
Between Tuesday and Thursday, a total of 591 million Zenith bank shares valued at N10.6 billion were traded.
The lender’s share price gained 8 percent in that period closing at N19.15 on Thursday, according to NSE (Nigerian Stock Exchange) data. That’s the highest price it has traded at since July 2019.
There would be more to come in terms of demand for Zenith bank as local non-bank institutional investors now banned from purchasing high-yielding CBN securities, otherwise known as Open Market Operations (OMO), pile into the bank’s stocks.
“Zenith has been on a tear since yields on treasury bills started collapsing and is showing no signs of slowing,” one trader told BusinessDay.
“It presents a compelling case for dividend yield play at a time when yields in the fixed income market is fast falling below inflation rate,” the trader said.
The yields on one T-Bills offer investors a negative real return of 1 percent, considering that inflation printed 11.23 percent at the last check in September.
Expectations that yields in the fixed income market are heading to single-digits and with inflation tipped to rise in the coming months, stocks with double digit dividend yields are likely to see increased demand.
Zenith is not the only big bank with dividend yields above the one-year government debt.
United Bank for Africa has a dividend yield of 15.9 percent. Again, investors are noticing.
A record 67 million shares worth N501 billion were traded Thursday alone, the most in the last seven trading days at least. UBA’s share price has jumped to N7.40, the highest since April 2019.
Guaranty Trust Bank also slightly edges one-year treasury bills with a dividend yield of 11 percent.
Investors traded a record 37 million units of GTB stocks worth N1.1 billion on Wednesday alone.
The increased demand has pushed the lender’s share price to N29, the highest since September.