2023’s Top-Yielding Nigerian Dividend Stocks

In recent times, the Nigerian stock market has seen several companies emerging as potential sources of high dividend yields.

This observation is based on comprehensive data extracted from the financial reports and corporate disclosures of these companies, shedding light on their commitment to providing attractive returns to shareholders. A recent analysis conducted by InfoStride News, focusing on dividend-paying companies, has unveiled a fascinating landscape of stocks offering compelling dividend yields.

In this analysis, we delve into the dividend performance of these companies, revealing that approximately 21 of them achieved dividend yields that exceeded an impressive 10%. These stocks hail from diverse sectors, encompassing construction and real estate, services and transportation, financial services, manufacturing, telecommunications, and consumer goods. The allure of such companies for income-focused investors lies in their consistent track record of delivering high dividend yields, which can serve as a promising investment strategy.

Understanding the Significance of Dividend Yields and Current Market Trends
It’s essential to emphasize that a high dividend yield doesn’t always signify an attractive investment opportunity. Sometimes, a seemingly elevated yield may be a result of declining stock prices, which may not be sustainable. However, what a high dividend yield does reveal is the income potential an investment offers relative to its current market price. When combined with potential capital gains, this provides a more holistic view of a stock’s total return outlook.

The dividend yield is a critical financial metric that gauges the annual dividend payments made by a company in relation to its stock price. A higher dividend yield indicates a more attractive income stream for investors. In the financial year 2022, around 50% of Nigerian listed companies paid dividends, with many of them distributing both interim and final dividends. This year has also seen several companies declare interim dividends for the 2023 financial year, including industry leaders like Access Holding, Zenith Bank, UBA, MTN Nigeria, Custodian Investment, Seplat, and the Nigerian Exchange Group. This reiterates the importance of a careful analysis and a retrospective examination of what these stocks have delivered in previous years.

Investors who had positioned themselves in the market in 2022 would have undoubtedly reaped the benefits of impressive yields offered by a host of companies. Some of these notable dividend-yielding companies in the 2022 financial year included Smart Products Nigeria, NAHCO, AXA Mansard, Access Holding, LASACO Insurance, UBA, GTCO, Zenith Bank, Total Energies, Okomu Oil, Berger Paints, and more.

Notable Performances and Growth Prospects of Specific Nigerian Companies
Among these companies, Smart Products Nigeria (SMURF) stands out with the highest dividend yield, recording an impressive 36.36% for the 2022 financial year. This translates to a dividend yield of 36.36% at the closing price of N0.22. Despite a dividend growth rate of -11.81%, reflecting a decline in earnings, the company’s dividend payments are adequately covered by earnings, evident in a payout ratio of 59.17% in 2022. These achievements are particularly noteworthy considering the 18% year-over-year decline in net income in 2022. Presently, the stock is trading at N0.20, reflecting a 9.09% year-to-date decline in its share value and currently offering a dividend yield of 40%.

Nigerian Aviation Handling Co. (NAHCO) is another standout performer, boasting a consistent track record of dividend payments over the past five years. In 2022, the stock delivered an attractive dividend yield of 18.75%. What’s even more remarkable is the company’s impressive dividend growth rate, as evidenced by a five-year compound annual growth rate (CAGR) of about 42%. The financial performance of NAHCO in 2022 was exceptional, marked by a significant 247% year-over-year (YoY) growth in net income. This robust performance likely contributed to an 87% dividend payout ratio for the same year. Currently, NAHCO’s stock is trading at N24 per share and has experienced a substantial 237% year-to-date appreciation.

AXA Mansard’s stock provided an 18% dividend yield, primarily due to its substantial payout. In 2022, the company distributed approximately 133% of its net income as dividends, implying that investors who held the stock received 18% of their investment back as income in the form of dividends for each unit of the company’s stock price. The significant rise in the payout ratio, coupled with a significant 34% drop in net income, raises concerns about the company’s ability to maintain its current dividend levels in the long term.

Access Holding Plc also delivered a solid 17.65% dividend yield in 2022. This means that for every investor holding the stock, they received a return of 17.65% in the form of dividends for each unit of the company’s stock price. Despite facing a 5% year-over-year reduction in net income, the bank maintained a payout ratio of approximately 35%. Impressively, the stock has experienced significant year-to-date (YTD) growth of about 85%, contributing to an overall total return of roughly 95%.

UBA, another Tier-1 bank, provided a dividend yield of 15% in 2022. The bank has a track record of consistently delivering dividends for the past five years, growing at a Compound Annual Growth Rate (CAGR) of 5.29%. Notably, UBA increased its dividend payout by 10% in the previous year, likely in response to a substantial 46% year-over-year (YoY) increase in net income. Currently, the stock is priced at N17.25 and has achieved a substantial year-to-date (YtD) appreciation of about 127%, influencing the dividend yield to be at 8.16%.

Evaluating Dividend Yields in Context: Balancing Income and Capital Appreciation
Apart from the mentioned companies, there are several others that have consistently paid dividends for the past five years, offering attractive dividend yields. Some of these include GTCO (+13.5%), Zenith Bank (+13.3%), Total Energies (+12.95%), Okomu Oil (+12.73%), and Berger Paints (+11.67%). While high dividend yields hold great appeal for income-oriented investors, it is essential to consider the long-term growth prospects of these companies. Investors should seek stocks that not only provide good dividend yields but also exhibit the potential for capital appreciation.

In conclusion, the Nigerian stock market presents a diverse array of companies that have consistently delivered high dividend yields, making them attractive options for income-focused investors. However, investors should be diligent in their analysis, considering the sustainability of these yields and the long-term growth prospects of the companies. Balancing income and potential capital appreciation is key to maximizing the benefits of dividend-yielding stocks in the Nigerian market.