Dividend yields on Zenith, UBA, Cutix and Total outperform Treasury bill

In the constant search for yield, risk averse investors who look for higher yields to compensate for more risk can look into four company stocks on the Nigerian Stock Exchange: Zenith Bank, UBA, Cutix and Total at current prices have a dividend yield greater than 12.53 percent which is the yield on the 1-year treasury bill in Nigeria.

As broad market prices continue to trend downwards, cheap stocks have become cheaper and dividend yields on companies have become more attractive. The Price to Earnings ratio of these stocks also give a hint of underpricing as the top four dividend yield had an average earnings yield of 24 percent.

The earnings yield refers to the earnings per share for the most recent 12-month period divided by the current market price per share. The earnings yield (which is the inverse of the P/E ratio) shows the

percentage of how much a company earned per share.

Tochukwu Okafor, Lecturer in Banking and Finance department at Covenant University explained that “the selloff in the market has opened avenues for cherry picking. Low risk portfolios can be created by selecting stocks with high dividend yield and low PE ratio. This investment strategy is similar to picking value stocks trading at a lower price relative to its fundamentals, such as dividends, earnings, or sales, making it appealing to value investors.”

Zenith Bank led the companies with the highest dividends yields with 15.13 percent and a PE ratio 3x, United Bank of Africa followed with 14.92 percent and a PE of 2.48.

“These stocks, to a trained eye, almost guarantee definite returns as these two banks will almost certainly post higher returns and pay a higher dividend next year. Buying these stocks represents value and maybe it’s a good place for risk averse investors to start entering the Nigerian equities market.” Okafor added.

The remaining companies with high dividends and relatively low PE include, Cutix (13.33%, 6x), Total (13.33%, 5.44x), Eterna (11.94%, 4.32x), Dangote Sugar (11.84%, 5.79x), Lasaco (11.43%, 3.55x) and Julius Berger (11.11%, 3.92).