5 Nigerian Stocks That Pay Fat Dividends

By Ryan Hoover Published: October 14, 2013, 9:00 am
Invest in Nigeria

I love a stock that pays a juicy dividend because receiving a check each year reminds me that I’m a part-owner of a business, not just a random ticker symbol with a fluctuating stock price.

Moreover, stocks with a history of consistent and rising payouts tend to outperform stocks that don’t.

The Nigerian Stock Exchange is currently home to some of Africa’s highest-yielding stocks. Here are five that I have my eye on.

AIICO Insurance
Dividend Yield: 8.78 percent

Nigeria’s largest life insurance company, AIICO has raised its dividend in each of the past three years, and it has increased 350 percent since 2010. Making this all the more impressive is the fact that its 2012 payout represents just 42 percent of annual profits, suggesting management will have plenty of latitude to at least maintain the dividend in 2013, barring a dramatic reduction in underwriting income. New regulations stipulating that all insurance premiums must be paid in advance will help improve the company’s cash flow.

Continental Reinsurance
Dividend Yield: 9.17 percent

With offices in Nigeria, Cameroon, Cote d’Ivoire, Kenya, and Tunisia and a book of business that spans 38 other African countries, Continental Reinsurance markets itself as the leading pan-African re-insurer. The company boosted its dividend 25 percent in 2012 and has paid one without a cut each year since listing on the Nigerian Stock Exchange in 2007. Earnings have been flat the first half of 2013, but with a 9.2 percent yield and a 63 percent payout ratio last year, the company is well worth a look.

Okomu Oil Palm
Dividend Yield: 7.20 percent

Palm oil is a hot commodity these days thanks to its growing use as a biofuel and as a trans-fat substitute. Okomu investors are enjoying the ride. The stock soared nearly 150 percent over the past 12 months, propelled by a 29 percent dividend increase and news that the company would double its production capacity by 2014, a move that would make it Africa’s largest palm oil miller. Okomu’s streak of consecutive dividends without a reduction stretches back to 2008, but with earnings down in the first half of 2013, that record may be under threat.

Skye Bank
Dividend Yield: 11.36 percent

One of Nigeria’s lower-profile banks, Skye operates 240 branches and 597 ATMs across the country. It lends heavily to the oil and gas sector, which accounts for some 30 percent of its total loan portfolio. Management doubled the previous year’s dividend payout in 2012 giving it one of the juiciest yields on the Nigerian Stock Exchange, after nearly boosting income by a factor of 10. Income growth has been considerably more anemic during the first half of 2013. It’s up just 6 percent, constrained by insufficient assets to lend. Even so, earnings should at least match last year’s mark, which bodes well for the dividend being maintained at current levels, if not raised.

Total Nigeria
Dividend Yield: 6.69 percent

This subsidiary of the French oil and gas giant isn’t involved in drilling or exploration. It works purely in the downstream sector of the market, operating a network of some 500 service stations and marketing a range of fuels and lubricants. It pays almost all of its income out to shareholders in the form of dividends. Thus, the dividend can fluctuate considerably from year to year. Earnings are down 18 percent during the first half of 2013 due to increased finance costs. This raises the spectre of a dividend cut, but the stock may be worth a close look on any price dips.

Intrigued? These stocks don’t presently trade anywhere but Lagos, so to purchase them you will need to open a Nigerian brokerage account. Here’s a step-by-step guide to getting started.

Do you have a favorite African dividend stock? If you’re feeling generous, clue us in to your find in the comments.

Ryan Hoover is an investment analyst with Africa Capital Group and the founder of InvestingInAfrica.net. Contact him at ryan@investinginafrica.net.

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