In the world of investing, few metrics spark as much interest and debate as the dividend payout ratio. This vital figure reveals how much of a company’s profit after tax (PAT) is returned to shareholders as dividends. A high payout ratio indicates a company’s emphasis on rewarding shareholders, while a lower ratio often suggests that management is prioritizing reinvestment to fuel future growth.
In 2024, Nigerian companies, especially in the manufacturing sector, have notably embraced generous payout strategies, delighting shareholders with handsome returns. Meanwhile, the banking sector has taken a more cautious and conservative path, balancing shareholder rewards with prudent capital management.
Let’s take a deeper look into the Nigerian companies leading the way with the highest dividend payout ratios in 2024.
Manufacturers Leading the Way
The manufacturing sector has emerged as the champion of dividend payouts in Nigeria this year. Heavyweights like Dangote Cement, BUA Cement, BUA Foods, and others have not only offered substantial dividends but, in some cases, returned almost their entire net profits to shareholders.
Dangote Cement: The Dividend King
At the very top of the list sits Dangote Cement, Africa’s largest cement producer. In 2024, the company declared an impressive dividend of N30 per share, amounting to N502.6 billion—an astonishing 99.87% of its N503.25 billion profit after tax.
This follows a similar pattern in 2023, where Dangote Cement paid out more than its net profit, achieving a payout ratio of 110.32%. Yet, despite its high dividend generosity, Dangote Cement retains strong financial stability, with N1.027 trillion in retained earnings.
Interestingly, its share price growth has been modest in 2024, posting just a 0.25% gain. However, the stock still offers an attractive 6.25% dividend yield, making it a favorite for income-focused investors.
The company’s strategy reflects a blend of shareholder reward and operational resilience, underpinned by robust cash flows and market dominance.
BUA Cement: Generous, Yet Cautious
Following closely is BUA Cement, another cement giant that has shown strong shareholder commitment. The company paid a dividend of N2.05 per share, totaling N69.42 billion—equivalent to a 93.93% payout ratio.
One important dynamic in BUA Cement’s case is ownership concentration. More than 96% of its shares are controlled by founder Abdul Samad Rabiu and his company, BUA Industries. This structure means the lion’s share of the dividend payout flows back to the controlling insiders.
Despite a challenging market environment, BUA Cement’s financials remain solid. However, its stock price has declined 10% year-to-date, currently trading at N83.70, and offers a 2.45% dividend yield. The company’s approach signals confidence in its financial strength, even amid market headwinds.
BUA Foods: Commitment to Shareholder Returns
BUA Foods, another company under the BUA Group umbrella, has also showcased a strong dividend culture. In 2024, BUA Foods declared a dividend of N13 per share, totaling N234 billion, representing 88% of its N266 billion profit after tax.
This payout marked a significant leap from the previous year’s N99 billion, reflecting BUA Foods’ determination to enhance shareholder value. Despite the heavy payout, BUA Foods maintains a healthy financial position, with retained earnings on the rise. Its stock price has remained relatively flat, posting a 0.72% gain year-to-date, and offers a 3.11% dividend yield.
Ownership is also highly concentrated, with 95.26% of shares held by insiders. Nevertheless, BUA Foods continues to balance shareholder rewards with sustainable growth.
Geregu Power: High Dividends, Modest Returns
Geregu Power Plc, a major player in Nigeria’s power sector, has positioned itself as a high dividend payer. In 2024, it declared a dividend of N8.50 per share, translating to a 77.35% payout ratio, or N21.25 billion out of its N27.43 billion profit after tax. Interestingly, in 2023, Geregu Power’s payout ratio was a staggering 125%, indicating a payout that exceeded its net income for the year.
Despite the generous dividends, Geregu Power’s share price has dipped 0.74% year-to-date, with a modest 0.74% dividend yield. The company is majorly owned by Amperion Power Distribution Company Limited, which holds 95.4% of its shares.
While high payout ratios can be attractive, investors need to keep an eye on the company’s ability to sustain such policies over the long term, especially in a capital-intensive sector like energy.
Africa Prudential Plc: Resilient Amid Stock Struggles
Another notable mention is Africa Prudential Plc, which maintained its dividend tradition by proposing a final dividend of N0.60 per share, bringing its total 2024 payout to N0.75 per share. This equates to a 68.39% payout ratio.
However, its stock has faced significant pressure, falling 33.25% year-to-date. Despite this, the company offers a solid 5.49% dividend yield, providing some comfort for dividend-focused investors.
Africa Prudential’s case highlights an important lesson for investors: high dividend yields can sometimes accompany declining share prices, and due diligence is crucial.
The Conservative Banking Sector
In contrast to the manufacturing sector’s generosity, Nigeria’s banking giants have opted for a far more conservative stance in 2024. The highest-ranking bank by payout ratio, Fidelity Bank, recorded a payout ratio of just 32.35%. Meanwhile, other big names like GTCO, UBA, and Zenith Bank maintained payout ratios ranging from 4% to 30%.
This cautious approach suggests a focus on capital preservation, regulatory compliance, and preparing for potential economic shocks. Nigerian banks face stricter capital requirements under regulatory frameworks, which partly explains their reluctance to distribute excessive profits.
Nevertheless, bank stocks continue to offer attractive dividend yields, ranging from 3% to as high as 16%, depending on the stock and entry price. For investors seeking a combination of stability and income, Nigerian banks remain compelling options.
Key Takeaways for Investors
The 2024 dividend season has revealed two clear trends among Nigerian companies:
- Manufacturers like Dangote Cement, BUA Cement, and BUA Foods are prioritizing shareholder returns, often distributing over 80% of their net profits.
- Banks are exercising caution, balancing dividends with the need to maintain robust capital buffers.
For investors, the choice boils down to investment goals:
- Those seeking high immediate income may find manufacturers’ stocks attractive despite their lower price growth.
- Those prioritizing capital preservation and gradual wealth building may lean towards banks and more conservative dividend payers.
However, high payout ratios, while attractive, also carry risks. Companies that consistently pay out nearly all their profits may have limited resources for future expansion, innovation, or weathering economic downturns.
Thus, it’s essential for investors to look beyond the headline dividend numbers and assess the overall financial health, industry prospects, and management strategies of dividend-paying companies.
Final Thoughts
In a challenging economic environment marked by currency volatility, inflation, and global uncertainty, Nigerian companies are showing resilience. By rewarding shareholders through substantial dividends, they are reinforcing investor confidence and underlining their financial strength.
Still, whether generous or conservative, the ultimate key for investors is to stay informed, remain diversified, and align their dividend investment strategies with their broader financial goals. As 2024 unfolds, Nigerian dividend stocks will remain a crucial area to watch — offering both opportunities and lessons for savvy investors.
