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
Dividend yield, %
|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|
|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.
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.