The nation’s capital market has been in the bearish state since the beginning of the year. As at the close of business on Tuesday June 18, 2019, the All Share Index (ASI), the metric that gauges the overall market performance of all the listed stocks, closed at 29,818.80 points. That means year to date, the market is down by 5.13 percent.
Sectoral indexes, which give market participants how stocks perform in their various subsectors, display different degrees of reactions to the market sentiment. The main board index closed year to date at -14.55 percent; NSE 30 Index, -12.69 percent; Banking Index, -10.09 percent; consumer goods index, -18.83 percent; Lotus Islamic index, -11.80 percent; industrial index, -15.21 percent, and pension index, -14.41 percent.
With this picture in mind, some market participants or those exploring the capital market for the first time might think there is no hope for investors in the capital market. However, this perception is not true. Share price appreciation, which is a phenomenon relating to gradual rise in the share prices of quoted securities, is just one of the benefits an investor could gain from the capital market.
Another benefit from the capital market is dividend payment, and this is the focus of this write-up. In 2018 dividend season, which was for 2017 financial year, listed companies on the Nigerian Stock Exchange (NSE), rewarded shareholders with N591.71 billion dividends. A dividend season usually comes up on or before three months after the financial years of companies have ended. For instance, when the 2018 financial year ended on December 31, 2018, companies were statutorily expected to announce their audited financial results starting from April 1, 2019 which is three months after their financial calendar has ended. There is no sin if the results are made available earlier than this date.
In the on-going 2019 dividend season which is for 2018 financial year, so far, listed companies have declared N784.4 billion as dividends, translating to an increase of 32.6 percent over what was paid in 2018 dividend season.
What this basically implies is that existing or prospective market players should not be discouraged by a decline in stock prices, even, this in itself, offers opportunities for shrewd players to take position in some strategic stocks at affordable prices.
Another important issue this article aims to address is, if an investor uses dividend payment as a metric to build a portfolio, how will such portfolio look like? Alternatively, how will each sub sector be weighted? We will assume two scenarios: those investors who are not averse to any sectors nor stocks; and those who want only halal stocks.
In 2018 dividend season, banking stocks paid N245.6 billion as dividends to account for 41.5 percent of the dividends paid last year by listed companies. Cement companies from building materials sub sector, rewarded shareholders with N188.7 billion representing 31.9 percent of corporate actions in 2018.
Investors who have stakes in food and beverages sub sector raked in N61.04 billion, which amounted to 10.3 percent of the dividends paid in 2018. Breweries sub sector paid N32.3 billion as dividends which translated to 5.5 percent of dividends paid last year. Investors in oil and gas stocks earned N27.8 billion as dividends, which translated to 4.7 percent of the total corporate actions declared on the NSE during the 2018 dividend season for 2017 financial year.
In all, companies from five sub sectors-banking, cement, food and beverages, breweries, oil and gas, accounted for 99.3 percent of the dividends paid in 2018 dividend season for 2017 financial year. In other words, a portfolio built with mix of banking, cement, food and beverages, breweries, and oil and gas stocks in this proportion on January 1, 2017 which remained unchanged till mid June 2018 would have performed creditably well as their stocks accounted for 99.3 percent of the dividends declared in 2018, provided the appropriate stocks in each sub sector were selected into the portfolio.
In 2019 dividend season, the same set of stocks-banking, cement, food and beverages, breweries, oil and gas, accounted for 95.9 percent of the corporate actions year to date. Investors that have stake in banking stocks have so far earned N220.5 billion as dividends year to date, representing 28.2 percent of the corporate actions year to date. Cement stocks from the building materials sub sector, have declared N277.9 billion as dividends, accounting for 35.5 percent of the corporate actions this dividend season.
Food and beverages stocks have so far declared N46.8 billion as dividends representing 5.98 percent of the total dividends declared year to date. Also, stocks in oil and gas sub sector, paid N190.7 billion year to date, thus accounted for 24.4 percent of the corporate actions year to date.
Stocks listed in the agric sub sector paid N4.86 billion in both 2017 and 2018. But while the corporate actions in 2017 amounted to 0.8 percent of the overall dividend payment, the same amount paid in 2018 translated to 0.62 percent of the overall corporate actions for that sub sector.
In the aviation sub sector, quoted stocks paid N532.8 million as dividends in 2018 as against N812.7 million paid in 2017. Chemicals and paints stocks, also from the building materials sub sector, declared N2.26 billion as dividends for 2018 compared with N1.66 billion in 2017.
For investors not averse to stocks from any sub sectors, they could focus on stocks from the banking, cement, food and beverages, breweries, oil and gas sub sectors for the remaining half of the year as the consistent dividend payment should guaranty them good rewards by next year’s dividend season. Other investors who prefer halal stocks could select stocks from cement, food and beverages, oil and gas, agric, chemicals and paints, healthcare, conglomerates as well as from the construction sub sector.
Source: NSE, BRIU
Source: NSE, BRIU
