The Nigerian Stock Market has suffered significantyear-to-date loss while continuing its southward path in the past months, before finding a new support level that brought the oscillating trend we saw in the recent weeks.
This is a pointer that the expected market recovery is underway, despite the fact that companies and market fundamentals needed to influence equity pricesremain very weak at the moment.
However, the release ofpositive information and improved macroeconomic indices in the weeks ahead will support the recovery process.
For now, the unholy combination of increasing unemployment rate, due to high cost funds as a result of high interest rate, soaring cost of governance, dwindling value of Naira as a result of the falling oil price, low purchasing power and weak Q3 corporate earnings have affected the market hugely.
Also, the government’s economic blueprint has not given direction yet to guide foreign and local investmentdecision making.
The uptrend witnessed in the first trading week of August was attributed to sentiment on low prices of equities as smart money consolidate its positions in some companies.
The current high dividend yield and margin of safety should guide discerning investors seeking opportunities to grow their portfolios and build wealth. They should buy quality stocks even as the market declines in the face of the expected recovery.
Targeting companies withconsistent history of dividend payment on quarterly or yearly basis will not be a bad idea at this time.
Research has shown that companies with a policy of consistently increasing dividends have outperformed the market on many occasions.Dividend paying stocks put cash in your pocket, helping to counter the effects of inflation.
Unlike earnings, dividends cannot be manipulated or faked; dividends provide continuous feedback on a company’s performance. As time goes by, dividend investors see their income steadily grow. You do not have to wait five to 10 years to determine whether the strategy is working.
Reinvested dividends provide a significant portion of the historical equity return and performance in any given year is driven by capital appreciation, but long-term returns are largely the result of reinvested dividends. Good companies grow their investors’ dividends, after all, you expect your employer to give you a raise periodically. Why wouldn’t you expect the same from your investment?
Spending dividends in retirement does not harm your investment. In addition, a good dividend portfolio can be bequeathed to your children and grandchildren.
A dividend portfolio is relatively cheap to maintain. We strongly advice that dividend paying stocks should have a spot in everyone’s portfolio, especially in times like this.
Another key factor to successful investment in this kind of market is going for companies that are leaders in their business and industry. If the company is a key player in its sector then it can raise prices to keep up with inflation, but not in every situation. The market leader can easily raise capital and survive economic downturns, considering the nature of its products and services that have no close substitute.
Such companies are money spinners with healthy cash flows.
As an investor you may take a full position in some stocks right now at a better price. There are some good quality stocks around that are immune to market sell off, meaning that after profit taking or free fall of the market, the share prices of some companies bounce back on the strength of its profitability and earnings.

Performances support dividend
Despite the seeming associated risk,equity investment has proven to be the best performing investment window, whether in a bullish or bearish market when compared to other investment options like bonds and fixed income instruments in the money market.
Typically, stock returns are derived from capital appreciation, dividends and even bonus issues. Dividends payment have historically accounted for 20 to 40% of the average annual stock market returns. A lesser known fact is that reinvested dividends have provided for between 44 to97% of historical stock market returns.
During tough market conditions such as the down market that we are now experiencing, investors should realize that counting their losses will not prevent further losses. They should rather change their investment perception and tag along with the market as it presents itself. Investors should take advantage of the opportunity of low priced equities to position in the market in anticipation of full year earnings of quoted companies in the first quarter of 2017, considering the present high dividend yield of stocks.
For now, there is noexpectation of corporate results that will influence stock prices, but with external forces or information that can drive the nation’s stock market.
So far, liquidity level remains tight and the government has failed to look into the plight of its citizens that have lost fortunes in the market as a result of deteriorating economic situation.
The falling prices of equities on the exchange has pushed dividend yield of many stocks and some sectors up.
But given the uncertainty of corporate earnings amidst the current economic slowdown, the market is probably showing that the dividend cut which has largely been concentrated on the manufacturing sector would spread to other industries as well.
Investors should be careful as the outlook for dividend growth in general in 2017 is slim, because some of the recently released earnings have revealed how many companies would be next year.
However, if you can achieve at least anything above 8% yield to cover the rise in inflation, you would be able to weather any short-term and long-termweakness in the market.
This does not mean that I am recommending a huge portion of your long-term portfolio in bonds, which are normally sold to retirees as a ‘safe and reliable source of income.’
You do get a fixed payment every period or so, but the purchasing power of this payment declines over time when inflation and other dynamics like time are factored in.
Thus a very good strategy in the long run is to create a diversified portfolio of stocks, that have shown consistency in raising their dividends year after year and spot an attractive dividend yield for your consideration.
Here, it is necessary for investors to know how the yield is computed whether based on forecast or historical dividend.
Dividend yield is calculated by dividing the latest dividend paid with the current market price of the company. Higher yield does not guarantee increase in dividend payout.