Dividend yield of stocks on Ghana Stock Exchange

dividend yield ghana

Earlier this year, I wrote about dividend payments of selected stocks on the Ghana Stock Exchange. In the same post, I mentioned the importance of dividend yield as a comparison criterion of how well dividends are paid by different stocks. Generally, it would be deceptive to compare just the dividend figures of two different stocks and conclude that one stock pays better dividend than the other. This is mainly due to the varying differences in the prices of various stocks. Note that dividends are paid per each share owned by an investor. Thus, to earn a meaningful dividend income, one must own an appreciable number of stocks. Now, imagine purchasing equal number of stocks of two different companies such as GOIL and AGA (AngloGold Ashanti Limited). GOIL and AGA currently trade at about GH¢2 and GH¢37 per share respectively. Hence, to purchase 100 stocks each of GOIL and AGA, you would require at least GH¢200 and GH¢3700 respectively. In a way, you need to invest more in AGA in order to own equal number of stocks as GOIL. Let’s assume that GOIL and AGA decide to pay GH¢0.06 and GH¢0.12 respectively as dividends to their shareholders. Owning 100 stocks each of GOIL and AGA imply that you would earn GH¢6 and GH¢12 from GOIL and AGA respectively. Comparing these amounts at face value, one may be tempted to conclude that the AGA’s dividend is twice better than the GOIL’s dividend. Nevertheless, don’t forget that you invested only GH¢200 in GOIL to earn the dividend income of GH¢6 while you invested a whooping GH¢3700 in AGA to earn the GH¢12. As you can see, it is surely better to earn GH¢6 on a GH¢200 investment in comparison to earning GH¢12 on a GH¢3700 investment. To avoid such deceptive comparisons of dividend payments, dividend yield is rather used.

By definition, dividend yield is dividend expressed as a percentage of a stock price. That is, Dividend yield = (dividend per share/price per share) × 100. Due to the continuous fluctuation of stock prices, dividend yield is normally estimated in reference to a stock’s closing price for a particular period (such as a financial year). Also, dividend yields of a present financial year are usually calculated based on the dividend payments for the previous financial year. For instance, to estimate the dividend yield of GCB bank for the 2016 financial year, one can utilise GCB’s dividend payment for the 2015 financial year (which was GH¢0.33/share) and GCB stock’s closing price for the same period (GH¢3.79). Thus, dividend yield of GCB bank for 2016 financial year = (0.33/3.79) × 100 = 8.7%

A stock’s dividend yield may depend on many factors such as the business sector, cash flow as well as policy regarding dividend pay-outs. For example, it is believed that stable institutions such as the banking sector mostly pay good dividends on their stocks. In addition, factors such as a sharp decline or increase in stock prices can also have an impact on the dividend yield of stocks. Let’s assume that ‘company A’, whose stock price closes the year at GH¢5 per share, declare a dividend of GH¢0.3 per share. The dividend yield, in this case, would be 6%. Now, if the stock price of ‘company A’ declines from the GH¢5 to GH¢2 the following year while it maintains the same dividend of GH¢0.3 per share, the company’s dividend yield would definitely shoot up to 15%.

Dividend yields can be of many benefits. In a post about the performance of stocks on the GSE, I made mention that capital gains (owing to price appreciation of stocks) alone do not constitute the total performance of stocks. In fact, dividend yield plays an important role when it comes to the overall profit or yield of a stock. For example, if the price of a stock goes up by 20% in a particular year and the company further pays a dividend reflecting a yield of 5% for the same year, the overall return of the stock would be 25%.

In a period of falling markets, dividend yield remains one main consolation to investors. Using 2015 and 2016 as typical examples when the Ghana Stock Exchange made losses of -11.77% and -15.33% respectively, an investor who benefited from an average dividend yield of 4% could be better off than one who gained none or less dividend yield. Good dividend yields can be particularly useful for investors who seek to grow their investment and at the same time receive some regular income. It must however be stressed here that the payment of high dividends by companies may also come at a cost as it can deny the companies of potential reinvestments.

Historical dividend yields of listed companies

Even though historical data does not guarantee future prospects, one may still be able to guess the future dividend of a company based on the historical trend of the company’s dividend yield. This is even more useful for investors who seek high dividend income. In the table below, you will find the historical dividend yield of listed companies of the Ghana Stock Exchange.

Historical dividend yield of stocks on GSE
Company
Trading symbol
Dividend yield, %
Average, %
2009 2010 2011 2012 2013 2014 2015 2016
1 AngloGold Ashanti Limited Depository shares AADS 0.81 1.00 2.51 0.00 0.00 0.00 0.72
2 Access Bank Ghana ABG *NA NA NA NA NA NA NA NA NA
3 African Champion Industries Limited ACI 0.0 0.0 0.0 0.00 0.00 0.00 0.00 0.00 0.00
4 Agricultural Development Bank ADB NA NA NA NA NA NA NA NA NA
5 AngloGold Ashanti Limited AGA 21.9 0.38 0.51 1.22 0.00 0.00 0.00 0.00 3.00
6 Aluworks Limited ALW 9.1 0.0 0.0 0.00 0.00 0.00 0.00 0.00 1.14
7 Ayrton Drugs Manufacturing Co. Ltd. AYRTN 0.8 1.31 0.0 0.69 0.00 0.00 0.00 0.00 0.35
8 Benso Oil Palm Plantation Limited BOPP 3.3 4.43 4.88 4.93 2.41 0.81 2.82 1.90 3.19
9 CAL Bank Limited CAL 7.3 1.6 4.64 6.84 3.57 5.25 5.3 9.7 5.53
10 Clydestone (Ghana) Limited CLYD 3.8 0.0 0.0 0.00 0.00 0.00 0.00 0.00 0.48
11 Camelot Ghana Limited CMLT 2.8 0.0 12.5 0.00 0.00 5 0.00 6.25 3.32
12 Cocoa Processing Company Limited CPC 1.3 0.0 0.0 0.00 0.00 0.00 0.00 0.00 0.16
13 Ecobank Ghana Limited EGH 5.7 0.0 6.27 8 5.18 5.66 11.27 12 6.76
14 Enterprise Group Limited EGL 0.7 5 1.58 3.33 0.00 1.43 1.04 2.1 1.90
15 Ecobank Transnational Incorporated ETI 21.3 2.82 0.0 2.25 0.00 0.00 0.00 2.8 3.65
16 Fan Milk Limited FML 1.0 4.08 0.84 1.13 0.00 1.71 0.00 1.4 1.27
17 GCB Bank Limited GCB 6.9 1.32 3.78 3.33 2.94 3.96 8.44 8.7 4.92
18 Guinness Ghana Breweries Limited GGBL 2.9 2.49 0.0 0.00 0.00 0.00 0.00 0.00 0.67
19 NewGold Issuer Limited GLD NA NA NA NA NA
20 Ghana Oil Company Limited GOIL 5.2 3.59 0.0 2.26 1.61 1.52 0.00 1.8 2.00
21 Golden Star Resources Limited GSR 0.0 0.0 0.0 0.00 0.00 0.00 0.00 0.00 0.00
22 Golden Web Limited GWEB 0.0 0.0 0.0 0.00 0.00 0.00 0.00 0.00 0.00
23 HFC Bank (Ghana) Limited HFC 1.6 3.41 3.56 4.89 0.00 2.33 6.67 7.06 3.69
24 Mega African Capital Limited MAC NA NA NA NA NA 0.00 0.83 1 0.61
25 Mechanical Lloyd Company Limited MLC 3.0 0.0 5.45 4 0.00 3.57 5.26 5.3 3.32
26 Produce Buying Company Limited PBC 0.8 3.52 4.89 5.18 7.33 8.8 12.57 6.16
27 Pioneer Kitchenware Limited PKL 0.0 0.0 0.0 0.00 0.00 0.00 0.00 0.00 0.00
28 PZ Cussons Ghana Limited PZC 1.59 2.09 2.83 7.53 6.65 0.30 3.50
29 Standard Chartered Bank (GH) Ltd. SCB 5.0 2.79 26.52 3.14 5.65 0.00 2.3 6.49
30 Standard Chartered Bank (GH) Ltd. (Prefrence shares) SCB PREF 10.00
31 SIC Insurance Company Limited SIC 5.9 4.43 5.21 0.00 0.00 0.00 0.00 2.22
32 Societe Generale Ghana Limited SOGEGH 10.0 7.45 8.33 5.33 6 Bonus shares 9.5 7.77
33 Starwin Products Limited SPL 2.0 0.0 28 0.00 0.00 0.00 0.00 4.29
34 Sam Woode Limited SWL 16.7 0.0 0 0.00 10 0.00 30.00 8.10
35 Trust Bank (Gambia) Limited TBL 2.6 0.0 4.29 0.00 0.91 5.88 9.6 3.33
36 Tullow Oil Plc TLW NA NA 0.0 0.39 0.00 0.00 0.46 0.46 0.22
37 Total Petroleum Ghana Limited TOTAL 3.5 3.4 2.81 13.72 1.61 2.3 4.56
38 Transol Solutions Ghana Limited TRANSOL 0.0 0.0 0.00 0.00 0.00 0.00 0.00 0.00
39 Unilever Ghana Limited UNIL 3.6 4.32 5.63 1.40 2.39 3.01 2.3 3.24
40 UT Bank Ghana Limited UTB 0.15 0.12 4.55 8 0.00 0.00 2.14

*NA: Not available, mainly due to company not listed by then.

Credit: GSE

 Dividend yield of stocks: Brief observations

From the above data, dividend yields of the financial sector appear to be higher than that of the other sectors. A few banks having a good average dividend yields for the period under study are CAL bank (5.53%), Ecobank Ghana (6.76%), GCB bank (4.92%), Standard Chartered Bank (4.49%) and Societe Generale Ghana Limited (7.77%). As earlier stated, the industrial sector of a company can have an influence on its dividend yield.

Even though dividend yields of the manufacturing sector are not that encouraging, there are a few exceptions. For instance, the average dividend yield of Benso Oil Palm Plantation Ltd., PZ Cussons, and Unilever Ghana Ltd. are 3.19%, 3.5% and 3.24% respectively. These are comparatively better than some of their counterparts in the manufacturing sector.

The average dividend yields of some companies, although good, are not evenly distributed over the years. One of such companies is AGA whose average dividend of 3% is mainly contributed by its 2009 dividend yield of 21.9%. ETI’s average dividend yield of 3.65% is similarly contributed by its 2009 dividend yield of 21.3%. Unfortunately, there are companies that have paid no dividend for such a long time (since 2009). Examples include African Champion Industries Limited, Golden Star Resources Limited, Golden Web Limited, Pioneer Kitchenware Limited, and Transol Solutions Ghana Limited.

4 financial stocks you may consider buying

4 financial stocks

Financial stocks generally perform well on the Ghana Stock Exchange in comparison to stocks of other sectors. Although I invest most of my stock portfolio in equity funds managed exclusively by professionals, I also enjoy picking some stocks on my own. Yeah, sometimes it’s fun to do some things on our own even though we may not be that ‘professional’. However, since stocks require some needful attention, I prefer to select very few ones which I can keep track. When it comes to stocks trading, a lot of measures need to be considered. For simplicity, I mostly look at three basic factors:

1. The price & worth of the stock.

2. How active the stock trades on the market.

3. How consistently dividends are paid by the listed company.

See also: A simple stock trading strategy for the risk-averse investor

Price & worth of stock

A huge portion of returns accrued from stocks come from capital gains. That is, the profit made by selling stocks at prices higher than what they were bought for. In other words, in an ideal condition, stocks should be sold at prices higher than what they were bought for in order to make some gains. The performance of the Ghana Stock Exchange (GSE) has been on a downward trend this year, with a year-to-date composite index of -12.11% as of 10th June, 2016. This compounds the stock market’s loss of -11.77% for the year 2015. In effect, prices of many listed stocks have drastically dropped from their previously high prices. While it may be logical to buy stocks during this period, it is also cautious to look beyond their low prices alone. Importantly, It is vital to also consider how valuable the stock is, even though the price may be low. A simple metric used to determine the value of a company’s stock is the ‘price per earning’ (P/E) ratio. P/E ratio measures a company’s current stock price relative to the company’s earnings. In essence, it can be used to decide whether the stock of a company is worth buying or not. A low P/E ratio may indicate that the company is undervalued or doing quite well relative to historical trends. In contrast, high P/E ratios normally imply overpriced stocks. It is always advisable to only compare P/E ratios of companies in the same industrial sector. This is because different ways are employed by different sector organisations to earn their money.

Stock activeness on the market

There are a few stocks on the Ghana Stock Exchange that hardly exchange hands. Most of such stocks are held for long term by institutional investors such as the Social Security and National Insurance Trust (SSNIT). Consequently, it becomes difficult to buy or sell them on the bourse. There has been an occasion when my money was locked up by a stock broker for much longer than expected due to the lack of trading activity for the stock I opted to buy. As a result, the money lost value pending the long wait for the stock purchase. I guess you already know the behaviour of our Ghanaian currency, right? It is for this reason why I now pay attention to stocks that actively trade on the market.

Consistency in dividend pay-outs

Many of us are aware that stocks are long-term investment products. But, how patiently can we wait to reap the final long-waited returns? I agree that companies must reinvest their profits in order to grow and make more returns. However, I also believe that as investors or shareholders, there should be some form of regular motivation to keep us investing in the companies. Of course, we need to stay ‘alive’ while we keep waiting for that faraway future growth. Unfortunately, not all listed companies consistently pay dividends to their shareholders. Thus, paying attention to historical trends of dividend pay-outs would be worth it when deciding on stocks to buy.

 

The 4 selected stocks

Now, imagine buying a product which sells at 30% less than its original price a few months ago. If this product is still of good quality, won’t it be worth buying more and selling them later when the price restores to the original high price or even higher? This is the primary motive behind the four picked financial stocks.

1. UT Bank Ltd. (UTB)

The current price of UTB stock is GHS 0.07 as of 10th June, 2016. About a year ago (12th June, 2015), the same stock sold for GHS 0.19, reflecting a huge loss of 61% within the same period. The current P/E ratio of UTB is 3.5 which appears to be relatively low. As an additional background, the initial public offer (IPO) of UTB was sold in 2009 at GHS 0.3/share. The stock struggled for a while but managed to reach as high as GHS 0.52 on 10th June, 2013. Concerning its activeness on the bourse, UTB is one of a few stocks that regularly trade in high volumes. The bank has however been facing some challenges in the past years making it difficult to pay dividends to its shareholders. The last time dividend was paid was 2012, with a dividend yield of 5.26%.

 

UT bank performance chart- financial stocks
One-year performance chart of UT Bank

 

2. Ghana Commercial Bank Ltd. (GCB)

The current price of GCB stock is GHS 3.04 as of 10th June, 2016. The same stock sold for GHS 4.9 a year ago (10th June, 2015), reflecting a loss of 38% within that period. Continue reading “4 financial stocks you may consider buying”