Dangote Cement, Nestle, GTCO, Zenith, MTNN, others hold superior returns -Coronation Research

Analysts at Coronation Research have identified a selection of eleven NGX-listed equities that will deliver superior returns, and beat inflation over the long term.

These companies include; Dangote Cement; Nestle Nigeria; Guaranty Trust Holding Company (GTCO); Zenith Bank; Stanbic IBTC Holdings; Dangote Sugar; Okomu Oil; Presco; NASCON; Custodian Investment; and MTN Nigeria.

They identified these companies in this week’s edition of their Nigeria weekly update.

According to them, if investors stick to a selection of equities that show high returns, and pay dividends consistently, these investors would arrive at an inflation-proof portfolio.

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“Our study shows that if we strictly adhere to a selection of NGX-listed equities that consistently show high profitability (our benchmark is a consistent Return on Equity of over 20.5 percent per annum) and that pay dividends, we arrive at a portfolio of equities that, between 1 January 2016 and the end of 2023, consistently beat inflation, as well as beating Naira fixed income returns,” they stated.

They identified 11 high-return equities companies listed on the Nigerian Stock Exchange, calling it the Model Equity Portfolio.

“We excluded MTN Nigeria in our long-term study of equity returns because it was only listed in 2019. Our study is agnostic concerning the sector,” they said regarding MTN.

They noted that the model portfolio, with dividends reinvested, returned 763.2 percent over the eight years to the end of 2023, with a compound annual growth rate (CAGR) of 30.9 percent, which easily beats inflation.

Also, they said that 2023 was a spectacular year for the model portfolio, so they measured its performance up to the end of 2022, to determine its validity.

“During the seven years from 1 Jan 2016 to the end of 2022, it returned 302.0 percent, with a CAGR of 22.0 percent, again beating inflation over the same period,” they stated.

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Between the beginning of the year and March 28, the model portfolio returned 49.91 percent compared with a return for the NGX All-Share Index of 39.84 percent, outperforming it by 1,007bps.

They had assumed a neutral position on bank stocks which corrected during the week ending April 5 and fell by 7.2 percent.

According to them, this was the week the Central Bank of Nigeria had directed banks to increase their capital base.

Similarly, last week the Model Equity Portfolio fell by 0.68 percent compared with a fall of 1.09 percent in the NGX All-Share Index, outperforming it by 41 bps.

In comparison to the NGX All-Share-Index which returned 36.83 percent, the model has returned 47.47 ytd, outperforming it by 1,064bps, they stated.

“There should be a new dialogue between long-term equity investors, including pension funds, and the most profitable, dividend-paying NGX-listed companies. Committed long-term investors need to own companies like these,” they said.