Harsh Operating Environment: Quoted Firms Cut Dividend Pay-out By N167bn

(Sundiata Finance) – Shareholders of quoted firms on the Nigerian Stock Exchange (NSE) in 2017 lost N166.86 billion in income, as dividend payment by 84 companies fell by 31 per cent to N363.69 billion this year, compared with N530.55 billion paid in the 2016 dividend season.
The harsh operating environment experienced in the country in the last few years have taken it toll on the companies’ profitability, thus affecting dividend pay outs to shareholders.
This decline affected sectors such as the financial services, building materials, food and beverages and healthcare, among others.
The exceptions during this period are the firms listed under the agric and airline sub-sectors, which recorded the most increase in dividend payment in 2017, an analysis by BusinessDay Research and Intelligence Unit (BRIU) of the dividend history of 84 companies that have so far announced their corporate actions, has shown.
The 84 companies captured in the analysis accounted for over 80 per cent of market capitalisation, as at June 14, 2017. Corporate information of the listed agric firms shows that the dividend paid in 2017 went up by N1.835 billion, representing an increase of 168 per cent over N1.09 billion paid in 2016 dividend season. This is as dividend paid by listed airline firms increased by 135 per cent to N762.06 million, up from N324.84 million paid in 2016.
Furthermore, corporate actions by insurance firms this year, rose marginally to N4.14 billion as against N4.07 billion paid in 2016 dividend season.
On the other hand, firms listed in the conglomerates, financial services, food and beverages, building materials, healthcare, manufacturing, as well as oil and gas sub sectors, collectively paid lower dividend this year, compared with the amount paid in 2016. Consequently, as against N7.46 billion dividend paid in 2016, conglomerates firms collectively paid N2.29 billion in 2017, representing a decline of 69 per cent.
The cumulative dividend paid by firms listed in the healthcare sub sector, declined by 66 per cent, from N1.24 billion last year, down to N428.40 million this year.
Saheed Bashir, senior investment analyst with Meristem Securities, attributed this to the harsh foreign exchange regime and the general economic conditions in 2016.
“Companies performances are worse this year, compared to last year. And particularly for the pharmaceutical firms, it was through the Grace of God that they survived in 2016. They are just coming back now with the flexibility introduced into the FX market. For those that have factories which are compliant with the WHO standards, they could not import active pharmaceutical ingredients (API) due to FX scarcity, and the nature of that industry is such that they could not just increase the prices of their drugs, especially the over the counter (OTC) drugs”, Bashir said.
Corporate actions of food and beverages firms fell by 38 per cent to N16.981 billion, in contrast to N27.387 billion paid last year. Apart from that, firms listed in the financial services, inclusive of ETF funds, paid N274.03 billion in 2016 compared with N156.41 billion so far declared in 2017, and this amounted to a 43 per cent decline in sectoral corporate actions.
Similarly, firms in the manufacturing sub sector have so far declared N666.69 million, representing a 17 per cent decline, when compared with N803.53 million paid in the 2016 dividend season. This is as the cumulative dividend paid by the firms quoted in the building materials subs sector, fell slightly, by 2 per cent from N155.25 billion in 2016 down to N152.62 billion in 2017.
“Going forward, we believe things will get better, especially now that the FX market has improved. For instance, May & Baker got an approval from the Federal Government to manufacture some drugs. This is a cash cow for the company and investors have begun to factor this into their investment decisions. Year-to-date, May and Baker has recorded a 302 per cent price increase. The FX flexibility will positively impact other firms that will pay better dividends by year end”, Bashir added.

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