FSDH Advises Investors to Consider Dividend Paying Companies
Analysts at FSDH have advised equities investors to pay attention to companies stocks with dividend payment history and impressive financial results.
In its equities research note, the firm projected that equities market is set for a bullish end in the financial year 2020.
“We expect a rally in the equities market in the coming months, we think investors should pay attention to stocks that have recorded impressive financial performance as of June 2020 particularly dividend paying stocks”, FSDH stated.
The firm’s top pick include top Tier-1 banks excluding Access Bank Plc. In the tier-2 class, Jaiz Bank Plc. made it to FSDH’s top lists.
In the list of stocks that excite analysts are Lafarge Africa, Dangote Cement and Flour Mills.
Others are Okomu Oil, May & Baker Plc. and Fidson Pharmaceutical Plc.
Equity research analysts believe that these dividend paying stocks will attract institutional and big-money investors in the coming months.
In addition, FSDH highlighted that a few sectors that are worth considering include the agriculture sector which remains resilient despite pressure from COVID-19 on supply chains and demand.
“This is evident in listed oil palm firms like Okomu Oil and Presco”, FSDH remarked.
The firm said these companies have had significantly impressive first half 2020 results and they pay healthy dividends.
In addition, they are very defensive in nature which helps to protect portfolios in the event of a market wide downturn.
“In our May investor note (Charting the course of Nigerian economic sectors amidst the pandemic), we highlighted how we expected the pharmaceutical & healthcare sector to benefit from CBN’s stimulus intervention.
“Recent financial reports from FIDSON, NEIMETH, and MAYBAKER has been very impressive.
“Thus, for more speculative investors we think these stocks are worth considering”, FSDH stated.
Meanwhile, analysts stated that Nigerians banks have continued to be resilient in the face of a harsh regulatory environment.
Despite frequent CRR debits, LDR constraints and unfavourable yield environment, FSDH noted that banks have turned to improved fee & commission income, gains on sale of investment securities and revaluation gains on net long FX positions to boost earnings.
“While most of the big banks (FUGAZ) are yet to publish their audited results, FBNH’s positive H1 2020 results offered an indication of what to expect.
“Nevertheless, we recommend investors keep their focus on healthy dividend paying banks such as GTB, Zenith, UBA, Access and Stanbic”, FSDH stated.
For risk-on investors, there are also small-cap banking stocks with attractive valuations and fair dividend yields such as FCMB & Fidelity etc.that are worth considering.
Investment and non-traditional banking performance also attract equity analysts attention.
Here stocks in this category are small-cap stocks but still do attract the attention of big-money investors.
FSDH said: “Our choicest picks are United Capital (UCAP) and Jaiz Bank due to the overly impressive H1 2020 performance”.
Jaiz Bank has been a big beneficiary of the recent Sukuk bond issuance from the Federal Government.
Rental income which are higher than typical government securities on these assets have helped boost earnings, FSDH remarked.
“We note Jaiz Bank recently paid its first dividend to investors since its listing in 2017”, analysts said.
FSDH stated that food procession sector (along with the oil palm sector) is the biggest beneficiary of the 2019 land border closure.
With smuggling of sugar and flour largely curtailed, food processors like Dangote Sugar and Flour Mills have recorded a significant upturn in performances.
Furthermore, they sell products that are not severely elastic and are gradually recovering control over pricing of their products.
“Thus, we expect these companies to continue to deliver healthy numbers through the year. In this sector, our favourite picks are Dangote Sugar and Flour Mills”, FSDH said.
Analysts however stated that cement producers are included on the list because their H1 2020 results confounded analyst expectations.
FSDH said Lafarge Africa and Dangote Cement produced healthy performance despite limited construction activities in Q2.
“While we think demand for cement may remain weak in the near term, we expect these companies to post decent performance due to company specific events like cost-cutting measures & improving leverage position in Lafarge and tax advantages in Dangote cement”, FSDH stated.