On 27th October, 2022, Fidelity Bank Plc (NGX: FIDELITYBK) released its quarter 3 financial statements for period ended 30 September 2022, posting a profit of N34.95bn profit for the period.
On Yochaa’s list of best stocks on the Nigerian Exchange Limited by Dividend Yield, Fidelity Bank Plc ranks #7, with a 5 year average yield of 9.11%.
In this series of “Dividend Stocks to watch on the Nigerian Exchange ahead of 2023,” we take a look at the prospects of Fidelity Bank’s 2022 financial year dividend payout to Shareholders.
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Fidelity Bank Plc is a consistent dividend paying company, that has gradually increased its dividend payout to Shareholders, and even went further to declare an interim dividend in 2022.
For 2017, 2018, 2019, 2020 and 2021, Fidelity Bank paid out total dividends of N0.11, N0.11, N0.20, N0.22, and N0.35 respectively.
Investogist Analysts have analyzed the historical trends of Fidelity Bank Plc and can infer a mathematical answer to this question.
Armed with the 9 months financial statements, we were able to project what the full year profit of the company will be.
With a projected profit for the full year period to end on 31 December 2022, and a 5 year historical data on the percentage of its annual profit paid as dividend, we inferred how much dividend Fidelity Bank Plc will pay for this financial year.
Our analysis of the past 5 years shows the below;
- 2017: Fidelity Bank Plc reported a profit of N14.45bn for the 9 months (9M) ended 30 September 2017, and reported a profit of N17.76bn for the full year period ended 31 December 2017. This represented a 23% difference between the 9M and the full year,
- 2018: In this year, profit growth continued as Fidelity Bank reported profit after tax of N17.85bn in 9M, and N22.92bn in the full year. The difference between the two was 28%.
- 2019: The profit growth trend continued, with a 49% difference between the N19.05bn profit in 9M and N28.42bn in the full year.
- 2020: The bank reported a profit of N2-.40bn profit in 9M and N26.65bn for the full year. The gap between 9M and Full year profits stood at 31%.
- 2021: A profit of N26.51bn was reported in 9M, while a profit of N35.57bn was reported for the full year, with a gap of 34% between the two.
We used the average percentage difference between the 9M and Full year profits as our basis for projecting the 2022 full year profit. This average difference stood at 33.06%.
Investogist analysts therefore estimated that for the full year period to end 31 December 2022, Fidelity Bank Plc will report a profit of N46.51bn.
Having established a figure for the expected full year profit, we proceeded to estimate what the dividend would be. We considered two paths the Board of Directors may take in proposing a dividend.
Path 1: The average percentage of the company’s profits paid out as dividend.
- 2017: Out of a profit of N17.76bn, the company paid a total dividend of N0.11 for every one of its outstanding shares. The total amount paid as dividend amounted to 18% of the company’s profit for the year.
- 2018: The company maintained its dividend payout of N0.11, representing 14% of the N22.92bn profit earned in that year.
- 2019: The company increased its dividend to N0.20, paying out 20% of its N28.42bn profit as dividend.
- 2020: The company notched up it’s total dividend to N0.22. This amounted to 24% of its profit for the year, which was N26.65bn.
- 2021: Fidelity Bank Plc rewarded Shareholders with a dividend of N0.35, this took 29% of its N35.57bn profit.
We calculated that the company’s 5 year average percentage of its profit paid as dividend is 21%, and thus project that the Board of Directors’ dividend proposal will fall in this region.
With a projected full year profit of N46.51bn, we expect Fidelity Bank to pay around 21% of this as dividend, which will amount to N0.34 dividend per ordinary share. The bank has already paid an interim dividend of N0.10, thus we expected a final dividend of N0.24.
Establishing a 10% range on our estimation, we can project that Fidelity Bank Shareholders will receive a final dividend between N0.21 and N0.26 for the 2022 financial year.
Path 2: The Board of Directors maintain the pattern used in declaring 2021 dividend.
For the 2021 financial year, Fidelity used 29% of its profit to pay dividend to Shareholders, should the Board tow the same line, the company will pay 29% of our projected profit of N46.51bn.
On this path, we project a dividend of N0.46 per ordinary share held by Shareholders.
Should I invest in Fidelity Bank Plc?
The share price of Fidelity Bank Plc is already up by 64.71% YTD, at its current price of N4.25.
At its current price, a final dividend of N24 will return a Dividend Yield of 5.64%, excluding 10% withholding tax.
With the inflation has risen to above 21% Fidelity Bank’s yield is a cause of worry.
There are other banks listed in the market that makes a better bargain than Fidelity Bank.
The bank has however shown great growth opportunities, and may be attractive to long term investors looking to spread their holdings.
We have a HOLD rating on Fidelity bank stocks.
Note: The dividend yield is a financial ratio that tells you the percentage of a company’s share price that it pays out in dividends each year.
Nnamdi Maduakor is a Writer, Investor and Entrepreneur
