Guaranty Trust Bank (GTB) dividend has been growing at a Compound Annual Growth Rate (CAGR) in the last six years compared to rivals as the lender continues to ensure that owners get a favourable minimum return.
Nigeria’s largest lender by market value, GTB saw dividend grow at CAGR of 11.11 percent compared to Zenith Bank’s 7.39 percent, UBA’s 5.38 percent and Access Bank’s recorded -0.065 percent.
GTB, which stood out as the only first-tier bank with a double digit returns on dividend growth, proposed a final dividend of N2.45 kobo for the full year 2018 compared to N1.45 dividend per share paid in 2013.
Zenith Bank which delivered the second highest return, albeit a single digit growth in the half-decade period has a dividend per share of N2.5 for the 2018 full year compared to N1.75 paid in 2013.
Meanwhile UBA has been able to pay 75 kobo more than it did six years ago when N1.75 kobo per share was paid out to its shareholders.
Access Bank which recently completed its merger with Diamond Bank last month has been unable to maintain a consistent increment in its dividend per share. For 2018 full year, the bank announced a final dividend per share of 25 kobo, compared to 0.35 paid in 2013.
Dividend is a good indicator of the financial health of a stock or a company as only firms making profit can pay dividend. In fact, the Dividend Discount Model (DDM) calculates the value of a company as the discounted value of all its future dividend payments.
With value accretion to investors in form of consistent dividend growth, the expected return on such stock increase.
BusinessDay analysis using the using the Gordon growth model estimates that GTB offer investors the second highest minimum return for their capital at 18.55 percent while Zenith with 18.76 percent lead the pack.
UBA’s cost of equity according to the analysis was 13.76 while Access had a negative of -2.60 percent of the four tier one banks covered.
The unavailability of its full year 2018 financials for First Bank as at the time of the analysis resulted in the exclusion of the bank from the analysis.
BusinessDay arrived at the estimations based on analysis of the Banks’ dividend data using the Gordon growth model, which is used to determine the intrinsic value of a stock based on a future series of dividends that grow at a constant rate.
SEGUN ADAMS & ISRAEL ODUBOLA
