5 Best Dividend-Paying Shares on the Nigerian Stock Exchange

What is a dividend-paying share?

Stocks that pay out dividends regularly are considered dividend stocks. These businesses often have a record of accomplishment of steady profitability and a commitment to continuing dividend payments far into the near future.

One has just to have shares of the company's stock in their brokerage account to receive dividend payments. Automatic dividend deposits will be made to your nominated bank account on the due date.

The 5 Best Dividend-Paying Shares on the Nigerian Stock Exchange

Dangote Cement Plc (NGX: DANGCEM)

Dangote Cement Plc produces and sells cement and associated goods for the limestone mining, coal production, and property investment industries in Nigeria and beyond Africa. In 2010, the firm officially changed its name from Obajana Cement Plc to Dangote Cement Plc.

The business operates as a branch of Dangote Industries Limited. It is headquartered in the Nigerian city of Lagos.

Currently, Dangote Cement has a market valuation of NGN 4.52 trillion, or around 16.1% of the whole Nigerian Company Exchange equity market, making it the third most valuable stock on the NGX.

With a year-to-date increase of 3.11% from its January 257.00 NGN share price, Dangote Cement is now the 56th best-performing stock on the NGX.

Airtel Africa Plc (NGX: AIRTELAFRI)

Airtel Africa is a significant supplier of telecommunications and mobile money services in 14 African nations, particularly in East Africa as well as Central and West Africa.

Airtel Africa provides its users with a comprehensive suite of telecommunications products, including mobile phone and internet services, as well as mobile money services both domestically and internationally.

Through shortened client journeys, the Group intends to continue offering a straightforward and intuitive customer experience.

Airtel Africa Plc is now the most valuable company on the NGX, with a market value of NGN 7.16 trillion, accounting for about 25.5% of the total equities market on the Nigerian Stock Exchange.

BUA Cement Plc (NGX: BUACEMENT)

BUA Cement Plc, a subsidiary of the BUA Group, is a Nigerian industrial firm that manufactures and markets cement products.

BUA Cement Plc was established in January 2020 through the merging of two of BUA's cement companies, the Cement Company of Northern Nigeria, and Obu Cement Company.

With a market value of NGN 2.35 trillion, BUA Cement Plc is currently the fourth most valuable company on the NGX, accounting for about 8.35% of the Nigerian Stock Exchange equity market.

The share price of BUA Cement started the year at 67.05 NGN and has since increased by 3.36%, placing it 55th on the NGX in terms of year-to-date performance.

Nestle Nigeria (NGX: NESTLE)

Nigeria-based food manufacturer and marketer Nestle Nigeria Plc is a subsidiary of the world's biggest food and beverage corporation.

The firm manufactures a vast array of items for the retail and wholesale markets. Some of Nestle’s well-known brands include names such as Maggi, Nan, Lactogen, and several others.

Nestle Nigeria is the sixth most valuable stock on the NGX, with a market value of NGN 1.11 trillion, or 3.95% of the Nigerian Stock Exchange equities market.

Stanbic IBTC Holdings (NGX: STANBIC)

Stanbic IBTC Holdings Plc is a Nigerian financial services firm that provides retail, corporate, investment, and wealth management banking products and services.

Stanbic IBTC Holdings Plc engages in venture capital and private equity investments serves as an executor and trustee and offers agency, insurance brokerage, and stock brokerage services.

Stanbic IBTC Holdings Plc, founded in 1989, is a subsidiary of Stanbic Africa Holdings Limited, and its headquarters are in Lagos, Nigeria Stanbic IBTC Holdings has been listed on the Nigerian Stock Exchange (NGX) since November 2012.

Stanbic IBTC Holdings is the twelfth most valuable stock on the NGX, with a market value of NGN 409 billion, representing about 1.45% of the Nigerian Stock Exchange equity market.

How to choose the Best Dividend-Paying Shares

When compared to bonds, dividend investing is a more stable and reliable approach to building wealth over the long term. However, excellent dividend-paying firms might be difficult to uncover.

Given this, we have compiled some information to help share traders choose dividend-paying shares to trade on the Nigerian Stock Exchange.

Overall Trends in the Sector

If you start by researching the best-performing sectors and the firms within those sectors that regularly pay dividends, you will have a good foundation from which to build your shortlist of stocks.

You should not only be familiar with the industries that have shown impressive performance in the past. You should also be familiar with the industries that are poised for growth and sustained profitability in the years ahead.

After narrowing down your search to a certain industry, you can filter the firms in your results by their dividend yields, which refers to the overall percentage of the share price that is paid out in dividends annually.

Dividend Yields

The dividend yield is a key indicator of the profitability of an investment in the form of dividends. Stocks in the utilities and commodities trading industries often provide the highest dividend yields overall.

Finding growth firms with a high dividend yield could be challenging and may need you to be patient with market volatility. Large-cap companies with a high dividend yield may be a good option if you would rather have more stable returns.

Strong Cash and Low Earning Expectations

Consideration of a company's potential for sustained profitability is essential when assessing dividend payers.

Any business may have a successful quarter occasionally, but only those who have shown sustained growth year after year deserves consideration. For this reason, it is recommended that investors look for firms that project a long-term profits growth rate of between 5% and 15%.

But tread carefully, since earnings disappointments are almost certain to ding the stock price for businesses whose growth surpasses 15%.

Keep clear of Debt

Paying dividends is a good sign, but investors should stay away from corporations with elevated levels of debt. The profitability of a stock is just one factor to consider. Stocks having a high Return on Equity (ROE) and minimal debt can be a good target.

Companies with a low debt load are preferable since their interest payments are cheaper. Interest payments are less likely to have an impact on dividends if most of a company's funding comes from stock rather than debt, as indicated by a low debt to equity ratio.

Consider the Long-Term Profitability of the Company

Dividends are payments made from a company's earnings to its stockholders. To this end, it is crucial to identify and prioritize businesses that are likely to provide strong long-term returns.

Long-term investing in dividend-paying equities is the ideal strategy. Long-term success is more likely for businesses that have strong foundations and management, as well as a favourable environment (inclusive of favourable government legislation and a thriving secondary market).

Check the Earnings per Share (EPS)

A company's profits per share may be calculated by dividing its net income by its total number of outstanding shares. Forward earnings per share (EPS) is a measure of a company's profitability that considers projections for future net income.

Evaluate the Price to Earnings Ratio (P/E Ratio)

The price-to-earnings ratio (P/E ratio) measures the value of a firm by comparing its market capitalization to its per-share profits. This ratio might help you determine whether the price you have been quoted for a firm is fair.

Knowing the average P/E ratio in the industry might help you determine whether a firm is a suitable investment. The opposite is true for low P/E ratios, where companies with high P/E ratios are undervalued.

Conclusion

Over time, dividends may have a significant effect on your portfolio's value. They may be used to supplement retirement income or provide an early exit from the workforce, and they can be reinvested to boost overall investment returns.

As part of your long-term investing strategy, you could choose to buy shares in dividend-paying firms via a low-cost fund or exchange-traded fund (ETF) held in a tax-deferred account with a reputable broker.