Global economic uncertainties have made safe heaven assets less attractive while the United States (US)- China trade spate and Germany’s are causing more gyrations in the stock market.
This means the best bet of an investor is a company that pays bumper dividend, and Dangote Cement Plc, the largest producer in Africa’s largest economy, is about to reward its owners generously from distributable profit.
A pioneer extension is expected to boost the cement makers’ profit, and its ability to deliver solid dividend yield for investors.
The Nigerian Investment Promotion Council (NIPC) in its third quarter (Q3-2019) Pioneer Status Incentive ( PSI) Report has approved Dangote Cement’s (Dangcem) application for a two-year PSI extension.
Following the approval, Dangcem will enjoy tax holiday on its N116.09 billion Ibese Lines 3&4 and N69.54bn Obajana Line 4 until February 2020.
According to management, the tax credit was as a result of N133.70 billion complete reversal on tax provisioned on profits earned from Ibese lines 3 & 4 and Obajana line 4 on the basis that they were yet to obtain approval for tax exemptions under the PSI scheme.
A tax credit of N89.03 billion propelled the company’s full year 2018 profit to N390.332 billion, and the growth momentum is expected to continue in 2019.
Pioneer status is a tax relief given to a company that sets up a plant in an economically disadvantaged area, but it has a deadline (between 5 and 7), during which it lapses.
Read also: Shareholders to get bumper dividend as pioneer tax to boost Dangote Cement profit
Dangote Cement is a dividend aristocrat as it has been consistently increasing dividend in the last five years. It paid a dividend of N272.06 billion in 2018, this compares with N178.92 billion, N144.92 billion, N136.40 billion, and N102.30 billion declared in 2017, 2016, 2015, and 2014.
The company has an aggressive dividend policy, paying out close to seventy percent out of distributable profit to owners in 2018, 87.60 percent in 2017; 77.65 percent in 2016; 75.22 percent in 2015, and 64.13 percent in 2014.
The dividend payout ratio is the ratio of the total amount of dividends paid out to shareholders relative to the net income of the company.
The firm has maintained a steady cash flow since 2014, giving it the impetus to fund future expansion plans, settle its obligations and pay dividend.
Cash flow from operating activities was N215.89 billion in 2014, this compares to N375.38 billion figure of 2018.
Analysts at Chapel Hill have placed a Buy ratings on the shares of Dangote Cement, and the company’s stocks are attractive as price to earnings ratio stood at 6.75 times.
The firm said it was looking to expand cement capacity on the continent by 29 percent to 62 million tons, consolidating its share of the Nigerian market. It plans to add six million tons in Nigeria next year, taking volume in Dangote Cement Plc’s home market to 35 million tons.
Cement makers in Africa’s largest economy are poised to take advantage of Federal Government record proposed capital expenditure to spur growth and strengthen profit.
President Muhammadu Buhari had directed the Ministry of Finance, Budget and National Planning to release N600 billion for Capital Expenditure in the next three months.
The President gave the directive in his nationwide broadcast to mark the Nigeria’s 59th Independence Anniversary in Abuja.
The president said Federal Government had so far released N1.74 trillion for execution of various capital projects in the 2018 fiscal year.
