GSE records 16.31% return in first half of the year

GSE performance

After failing to post positive results in the last two years, the Ghana Stock Exchange continue on its track of recovering from previous losses. This is reflected in its performance in the first half of the 2017 year. At the end of trading session yesterday (30th June 2017), the GSE Composite Index inched up by 12.77 points to close at 1,964.55, representing a year-to-date gain of 16.31%. Likewise, the GSE Financial Stocks Index edged up by 11.5 points to close at 1,824.88, representing a year-to-date gain of 18.08%. Yesterday’s gains were made possible by six gainers and no losers. At the end of the trading session, Standard Chartered Bank Limited (SCB) led the gainers with 11 pesewas to close at GH¢17.04 per share. This was followed by Benso Oil Palm Plantation Limited (BOPP) and Ghana Oil Company Limited (GOIL), which gained 8 pesewas and 5 pesewas each to close at GH¢4.40 and GH¢1.87 per share respectively. Fan Milk Limited (FML) also gained 4 pesewas to close at GH¢11.82 per share while Enterprise Group Limited (EGL) and Ecobank Transnational Incorporated (ETI) both gained a pesewa each to close at GH¢2.39 and GH¢0.13 per share respectively.

In relation to the year-to-date performance of individual stocks, UTB bank lead with 133.33%, followed by BOPP (111.54%) and GOIL (70%) respectively. These are then followed by GCB (46.07%), SCB (39.98%), ETI (30%) and SOGEGH (20.97%). Others include CAL bank (16%), ALW (14.29%), SCB PREF (13.33%), TOTAL (12.12%), FML (6.1%), EGH (6.06%) and UNIL (5.76%).

Despite the overall positive results of the exchange, a few listed stocks posted negative returns in the half year. Notable of these stocks are Mechanical Lloyd Company Limited (-33.33%), HFC Bank (-26.67%) and Tullow Oil Plc (-22.10%). Other stocks with losses so far include Starwin Products Limited (-33.3%), Produce Buying Company Limited (33.3%), Ayrton Drugs Manufacturing Co. Ltd. (16.67%), PZ Cussons Ghana Limited (-9.09%), Guinness Ghana Breweries Limited (8.59%) SIC Insurance Company Limited (-8.33%), AngloGold Ashanti Depository shares (-7.69%) and Access Bank Ghana (-7.32%).

In the same period, a few stocks such as Agricultural Development Bank, Golden Web Limited, Cocoa Processing Company Ltd. and Clydestone (Ghana) Ltd. neither recorded a gain nor a loss.

Could February be good month to buy stocks on GSE?

February _ex-dividend date

Very recently, I posted about dividend payments of some selected companies on the Ghana Stock Exchange. One thing peculiar about dividend declaration is ‘ex-dividend date’. Whenever board of directors declares dividends, they also announce an ex-dividend date in order to determine rightful owners of dividends for stocks purchased afterwards. To qualify for a declared dividend, investors must buy stocks, at least, one business day before the ex-dividend date. For example, when SOGEGH (Societe Generale Ghana Ltd.) declared dividends last year, it further announced ‘23rd March, 2016’ as the ex-dividend date. What this implies is that any investor who purchased SOGEGH shares before 23rd March, 2016 was entitled to the declared dividend. On the other hand, any seller of SOGEGH shares traded after the said date was entitled to the declared dividend.

Now, before you ask the question ‘what has ex-dividend date got to do with buying stocks in February?’ consider visualising the purchase of a cow that is due to deliver a calf. All things being equal, you (as the buyer of the cow) stand to benefit from the additional calf in the immediate term.

Back to the dividend subject, February is known to be the month when many traded companies begin to declare their final dividends for the preceding financial year. Even though some institutions publish their dividends later in the year, many declarations often start in the latter days of February through the months of March and April. Examples of trading companies that had previously declared their dividends in the said period can be found below:

  1. CAL Bank Ltd.
  • Dividend for the 2009 financial year was published on 2nd March 2010
  • Dividend for the 2010 financial year was published on 28th February 2011
  • Dividend for the 2013 financial year was published on 21st February 2014
  • Dividend for the 2015 financial year was published on 29th February 2016
  1. SOGEGH
  • Dividend for the 2009 financial year was published on 23rd February 2010
  • Dividend for the 2010 financial year was published on 3rd March 2011
  • Dividend for the 2011 financial year was published on 8th March 2012
  • Dividend for the 2013 financial year was published on 5th March 2014
  • Dividend for the 2015 financial year was published on 3rd March 2016
  1. GCB Bank
  • Dividend for the 2012 financial year was published on 30th April 2013
  • Dividend for the 2013 financial year was published on 30th April 2014
  • Dividend for the 2014 financial year was published on 31st March 2015
  • Dividend for the 2015 financial year was published on 19th April 2016
  1. Fan Milk Ltd.
  • Dividend for the 2008 financial year was published on 16th March 2009
  • Dividend for the 2009 financial year was published on 17th March 2010
  • Dividend for the 2010 financial year was published on 6th April 2011
  1. HFC Bank
  • Dividend for the 2008 financial year was published on 26th March 2009
  • Dividend for the 2009 financial year was published on 11th March 2010
  • Dividend for the 2014 financial year was published on 31st March 2015

Imagine buying some of these mentioned stocks and getting entitled to their declared dividends (if purchased before the ex-dividend dates). As mentioned earlier, it’s like purchasing a cow that is due to deliver a calf or purchasing a chicken that is due to lay eggs. In this instance, the calf or the eggs correspond to the dividends due to be paid.

february_pregnant stock

Getting paid dividends for stocks held for just a couple of months is a great deal. I mentioned in my previous post that dividend yields of stocks usually range from 4-9%. Let’s assume that you purchase CAL Bank’s stock whose historical dividend yield swings around 8%. If you hold these stocks for 3 months and get paid the dividend, your benefit would outweigh fellow shareholders who might have held their stocks for 1 year (12 months) but getting paid the same dividend yield. In fact, the 8% dividend yield (of stocks held for 3 months) extrapolates to about 32% per annum. [That is, (12/3) × 8 = 32%]

Don’t forget that some well-informed investors hold on to their stocks anytime dividends are declared even if they had earlier intended to sell them. They do so, in particular, if the dividend yields are good. Their motive is to postpone any sale of stocks until the ex-dividend date in order to gain from the dividend payments. Hence, before you wait for listed companies to begin publishing their dividends, why don’t you take advantage of it now? As you know, buying stocks on the GSE may also take processing time.