By Jeph Ajobaju, Chief Copy Editor
Both Zenith Bank and Guaranty Trust Bank (GTBank) currently offer double digit yield on shares, a glimpse of optimism as 2021 emerges from the pandemic storm that ravaged social and economic life across the world.
Year 2021 looks more promising than 2020 which had record disruptions in financial markets, as this year shows a growing number of high dividend yielding stocks riding on the back of economic recovery gathering steam.
Nairametrics writes that despite unprecedented boom in the crypto market, some traditional investors prefer less risky assets, particularly stocks with strong dividend yield prospects.
These stocks come with a history of annual dividend growth, making powerful statements about their financial resilience and commitment to shareholders.
Globally also, many dividend stocks are gaining momentum and offering investors a stable option for earning income.
Below is a list of Nigerian banks posting high dividend yields, as compiled by Nairametrics:
Zenith Bank
Zenith Bank, Nigeria’s most profitable bank, is at the top of blue-chip stocks with a dividend yield of 13.2 per cent.
Its first quarter 2021 (Q1 2021) unaudited results show profit before tax ticked up 3.8 per cent to N61 billion, and profit after tax 5 per cent to N53 billion.
Guaranty Trust Bank
GTBank, Nigeria most valuable bank by the market value of N843.2 billion, currently offers a dividend yield of 10.42 per cent.
The bank reported Q1 2021 total deposit growth to N3.717 trillion, a 3.0 per cent surge compared to N3.611 trillion in Q1 2020.
GTBank Managing Director Segun Agbaje has reiterated the bank’s resilience and prudent approach towards firmer risk management and the efficacy of its digital-first customer-centric business strategy.
Access Bank
Access Bank posts a dividend yield of about 9.82 per cent.
The bank, headed by Herbert Wigwe, recorded N222.1 billion gross earnings in Q1 2021, a 6 per cent gain above the N202.98 billion posted in Q1 2020.
Fidelity Bank
Fidelity Bank recently astonished market analysts when its Q1 2021 profit after tax swelled by nearly two-thirds, with profit before tax surging from N6.85 billion in Q1 2020 to N10.13 billion in Q1 2021.
It currently offers a dividend yield of 9.78 per cent.
Stanbic IBTC Bank
Stanbic IBTC Bank, known for its strong wealth and pension management system, currently offers a dividend yield of 8.70 per cent.
Its Q1 2021 results show profit before tax of N12.1 billion, 50 per cent lower than the N24.4 billion in Q1 2020, but recent stock market data shows that investors are increasingly buying its shares.
The bank’s current share price of N46 is within its 52 weeks’ high of N53.25.
Falling yield may shift investors’ strategy
Investors’ appetite and need for income traditionally come from fixed income instruments like treasury bills and bonds, according to Nairametrics.
Ten-year Nigeria treasuries have delivered an average yield in the upwards of 15 per cent, providing a high income to investors with a minimal level of risk.
Yield curves fell across all tenors as of Q1 2018. The 10-year yield fell 6 per cent between January and October 2017 while 20-year yield dipped to to 15.07 per cent in 2018 against 14.74 per cent in 2017.
Granting that yields move in the opposite direction of prices, Nairametrics explains, this trend implies that the prices of fixed income instruments are trending upwards indicating that people are buying more and more of FGN and other bonds.
This also implies that the government may be able to issue T-Bills or refinance maturing bonds at cheaper rates.
One effect of the decreasing yield is that it is creating a gap between investors’ income needs and the income usually provided by traditional fixed income investments.
With bond yields trending low, investors could be forced to change their strategy away from traditional fixed income instruments to high yield dividend stocks.
A change in strategy can deliver both the high yield required to meet current income needs and the opportunity to grow principal. But the Nigerian market lacks a sizeable number of high dividend yield stocks.
The relationship between stock prices and dividend yield is such that as stock prices increase, dividend yield decreases.
However, those with keen eyes on the market may discover stocks that could bridge income gap created by falling trend in yields.
