These companies are not large or medium cap equities. They are categorized as small, but with strong and growing earnings capacity for the long term, with potential to outperform the market with the right focus by their management to deliver value for income investors and traders that are farsighted enough to build their tent with such stocks as part of their medium to long-term investment goal.
At a time when more than 80% of stocks listed on the floor of the Nigerian stock exchange have somehow revealed an inability to pay dividend owing to their declining earnings capacity and as in the case with quite a handful of them- loss before and after tax, due to the negative impact of the nation’s economic recession on the sectors of the economy they operating in.
As a result of the recession, only players in the financial and services sectors have shown relative resilience as shown in their third quarterly earnings report, while most of the small caps stocks are in greens and even displaying potentials to further grow their earnings going forward.
The marvelous dividend yield of the small cap equities selected by INVESTDATA Research and listed here-under, boast of above market-average dividend yields of 4%, besides offering better returns than Treasury Bills and on other fixed income securities that offer an annual return of 21% per annum (an estimated 5.25% in 90 days).
In less than two months, these stocks have yields above 5.25% between the mark down and payment date in the fixed income market.
Consequently, market timing and money management become more important for financial and fund managers, including investors and traders as the earnings season draws even closer just as inflation figure for January is expected to influence investment decision this week and beyond.
However, despite the relatively low risk in investing in small caps stocks, one must not fail to mention the equally high risk of exiting quickly, due to low volume, which remains a major problem associated with some of them.
This can, nonetheless, be managed when you avoid the temptation of being greed that comes from setting reasonable returns target that allows you to exit before the party is over, thereby avoiding the usual stampede.
Don’t overlook penny stocks now, check out this list of 10 small cap stocks that you can add to your portfolio for dividend and capital growth.
This bank, in recent time, has emerged the most SME-friendly bank with focus on supporting that all-important sector described as the engine room of economic growth and development. The stock is topping the market in terms of Dividend Yield, revealing its value and high payout, relative to share price. This was attributed to low price despite the strong earnings. The bank is not consistent in growing dividend payment as a result of its undulating earnings’ performance. Its performance in recent times shows a growing earnings power which can be attributed to the bank’s increasing attention to SME, trade facilitation, improving risk management and the Central Bank of Nigeria (CBN) foreign exchange policy that has boosted the bottom-lines of banks after adjustment.
On the strength of the bank’s third quarter Earnings Per Share of 30 kobo, the likelihood of dividend in the range of 12 to 14 kobo is high and anything closer to the figure paid in 2016 financial year will be a strong driver for its price. It is currently trading at 2.87x earnings with a yield of 18.60%.
Income and growth investors should keep their gaze on the stock. The technical position of the bank is revealed in the investing with numbers table (reproduced herewith).
This company is a leading share registration service provider in Nigeria. It is the only one of its kind listed on the exchange, where its shares have been traded for four years now, during which time it has remained a delight of shareholders. Of particular interest to shareholders is the high dividend payout on the strength of strong earnings power, since Afriprud became a quoted company. One must not however fail to mention the slowdown in 2016 (going by figures for the first three quarters), compared to numbers posted in 2015. Result for the 2016 audited financial year is expected in the market this quarter.
The company’s performance has been mild with EPS moving from 10 kobo in the first quarter to 13 kobo in second quarter and then 41 kobo in third quarter, representing an average 103% growth in each quarter. On the strength of the numbers posted so far, the expected EPS is projected to be in the region of 52 kobo, and a dividend possibility of 30 to 40 kobo is high. Its earnings are relatively strong. The stock trades at 7.59x earnings and a yield of 14%.
For dividend income, investors should look the way of this equity. This is the only company playing the investment world with free money.
For technical position of the stock see the investing with numbers table.
NPF Microfinance Bank
The Nigerian Police Force Microfinance Bank was in third position on the dividend yield table, with 13.89% yield as at the close of trading on February 7, 2017. This is a leading player in its sub-sector with a focus on delivering satisfactory service to its Police community and other customers. The bank’s conservative and prudent management have reflected on the numbers emanating therefrom. Its third-quarter EPS of 30 kobo is already higher than the full year EPS of 21 kobo for 2015. Over the past seven years since it was listed on the exchange it has paid dividends consistently and made its report available as and when due.
On the strength of the expected full year earnings projection of 36 kobo, the possibility of dividend increase in the range of 15 to 20 kobo is high. The current P/E ratio of 3.60x is attractive, especially for income investors given that trading the stock is a bit difficult due to its volume.
For its technical view see the investing with numbers table for guide technically.
This bank occupied the seventh position in the market and fourth in its financial services sector with a dividend yield of 12%. Sterling bank has a strong customer relationship and focused on commercial and investment banking. Prior to this time, it has not been regular in rewarding shareholders due to its unstable performance in terms of earnings growth. However, in recent years the trend is changing as the bank rewarded investors in 2016, a trend expected to continue. Dividend payout has increased in recent years from six to nine kobo in 2016, despite the burden of rising non-performing loans arising from the country’s troubled operating environment that has depressed the profitability level of many banks. The CBN’s forex policy adjustment here and there has influenced the performance of operators in Nigeria’s banking industry as shown in the results emanating therefrom.
The possibility of dividend cut is higher than an increase or remaining on the same level as previous year. The stock trades at 3.98x of earnings and is attractive for income investors and people playing it for long term. See the investing with the numbers for technical position of the bank.
United Capital Plc
United Capital Plc, ranked 12th with a dividend yield of 9.43% at the end of trading on February 7, 2017. This company is into investment banking, financial advisory service, asset management and equity trading on the floor of the Nigerian Stock Exchange. It was listed just four years ago. And within this short period it has increased its capital base by way of right which supported its earnings power as reflected on the numbers posted in the just concluded financial year, compared with the 2015 numbers.
As a financial service provider, the possibility of increasing its dividend payout for 2017 is very high, due to strong figures posted so far and the profit realized from the sale of its investment in Metropolitan Life Assurance, considering its third quarter EPS of 78 kobo and the 2015 financial year dividend of 35 kobo on the strength of 43 kobo full year earnings for that period. Also, the company’s activities as a player in the financial service industry, particularly investment banking which involves sourcing of finance for companies in energy, oil, manufacturing and others sectors, have continued to impact positively on its bottom line.
On the strength of its projected 2016 full year EPS of N1.00, dividend possibility in the range of 45 to 60 kobo is likely. This will at the same time push its share price further if actualized at the end of the day. The company’s price to earnings of 4.75x is attractive, indicating that the waiting period in this stock is short, especially as it is expected that its earnings power will continue looking up. See the investing with numbers for the company technical position.
To be continued…