Zenith Bank, United Bank for Africa (UBA), Guaranty Trust Bank (UBA), Access Bank, are the most attractive dividend paying stocks in the banking industry.
This means they are giving investors a high minimum rate of returns for investing in their companies. moreso, ordinary shareholders are risk takers as they the last to be settled when a firm is bankrupt.
These dividend Aristocrats, recorded yields higher than the industry average of 5.56 percent, according to Markets and Intelligence calculation.
Putting a cut off on dividend yield is a hard nut to crack; a yield of 5 percent is the norm in India stock market.
Analysts say with market sentiment remaining subdued, it could be time to look at high dividend yielding banks.
Dividend yield is the financial ratio that measures the quantum of cash dividends paid out to shareholders relative to the market value per share. It is computed by dividing the dividend per share by the market price per share and multiplying the result by 100.
Zenith Bank has a Dividend yield of 10.50 percent, nearly doubles industry average as it continues to record double digit growth in earnings amid a tough and volatile macroeconomic environment.
UBA, GTBank, and Access have dividend yields of 7.94 percent, 6.74 percent, and 6.25 percent, outperforming the industry average.
On the flip side, Fidelity’s dividend Yield of 4.48 percent, First City Monument Bank (FCMB); 4.38, First Bank Holdings Nigeria (FBHN) Plc; 2.36 percent, and Stanbic IBTC Holdings Plc; 1.03 percent are below the bench mark.
Banks in Africa’s largest economy and most populous nation are rewarding shareholders with income from distributable profit.
Board of Directors of eight lenders under our coverage have agreed to pay a cumulative dividend of N200.49 billion, representing a 31.12 percent increase from last year’s figure.
Aristocrats like GTBank and Zenith increased payment by 38.09 percent and 35.38 percent to N76.93 billion and N70.63 billion from N55.71 billion and N52.17 billion the previous year.
FBHN increased payment by 24.93 percent to N8.97 billion in the period under review from N7.18 billion the previous year despite beleaguered assets quality.
“I think the major thing is that they had stronger earnings last year and they stick to progressive dividend payment which is positive for the stock market,” said Tajudeen Ibrahim, head of research at Chapel Hill Denham Limited.
“It reflects some incentives for potential investors to pick up stocks of some of the companies that have announced robust dividend payment,” said Ibrahim.
The average dividend yield of these 8 lenders’ stood at 22.16 percent in 2017, from 20.05 percent in 2016 as they remain main a less aggressive policy.
The easiest way to create a buffer is to have strong profit and conservative payout ratios, according to SegunAgbaje, managing director of GTBank.
Zenith, UBA, FCMB, FBHN, and Stanbic have year to date return of 1.01 percent, 2.91 percent, 47.97 percent, and 17.97 percent, outperforming the NSE ASI index of -0.1 percent.
