On 24th October, 2022, United Bank for Africa Plc (NGX: UBA) released its quarter 3 financial statements for period ended 30 September 2022, posting a profit of N116bn profit for the period.
On Yochaa’s list of best stocks on the Nigerian Exchange Limited by Dividend Yield, UBA Plc ranks #4, with a 5 year average yield of 10.66%.
In this series of “Dividend Stocks to watch on the Nigerian Exchange ahead of 2023,” we take a look at the prospects of UBA’s 2022 financial year dividend payout to Shareholders.
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United Bank for Africa Plc is a consistent dividend paying company, it has paid dividends consistently for the past 5 years and beyond.
For 2017, 2018, 2019, 2020 and 2021, it paid out total dividends of N0.85, N0.85, N1.00, N0.52, and N1.00 respectively.
Investogist Analysts have analyzed the historical trends of United Bank for Plc and can infer a mathematical answer to this question.
Armed with the recent 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 infer how much dividend UBA Plc will pay for this financial year.
Our analysis of the past 5 years shows that UBA has followed up the profits it reports in the 9 months period with a full year profit.
- 2017: It reported a profit of N60.92bn for the 9 months (9M) ended 30 September 2017, and reported a profit of N77.54bn for the full year period ended 31 December 2017. This represented a 27% difference between the 9M and the full year,
- 2018: In this year, profit continued to climb, as UBA reported profit after tax of N61.69bn in 9M, and N78.60bn in the full year. The difference between the two was the same 27% calculated between the two in the preceding year.
- 2019: The growth trend remained, with a 9% difference between the N81.62bn profit in 9M and N89.08bn in the full year.
- 2020: The bank reported a decline in profitable over 9M but maintained the same growth trend over the full year, with a N77.13bn profit in 9M and N109.16bn for the full year. The gap between 9M and Full year profits itched up to 42%.
- 2021: A profit of N104.59bn was reported in 9M, while a profit of N118.67bn was reported for the full year, with a gap of 13% 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 stands at 24%.
Investogist analysts therefore estimated that for the full year period to end 31 December 2022, United Bank for Africa Plc will report a profit of N143.62bn.
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 N77.54bn, the company paid a total dividend of N0.85 for every one of its outstanding shares. The total amount paid as dividend amounted to 37% of the company’s profit for the year.
- 2018: The company maintained its dividend payout of N0.85, representing 37% of the N78.60bn profit earned in the year.
- 2019: The company increased its dividend to N1.00, paying out 38% of its N89.08bn profit as dividend.
- 2020: The company dropped it’s total dividend to N0.52. This amounted to 16% of its profit for the year, which was N109.16bn.
- 2021: UBA pushed the dividend back up to N1.00, which took 29% of its N118.67bn profit.
We calculated that the company’s 5 year average percentage of its profit paid as dividend is 32%, and thus project that the Board of Directors’ dividend proposal will fall in this region.
With a projected full year profit of N143.64bn, we expect UBA to pay around 32% of this as dividend, which will amount to N1.20 dividend per ordinary share. The bank has already paid an interim dividend of N0.20, thus we expected a final dividend of N1.00.
Establishing a 10% range on our estimation, we can project that UBA Shareholders will receive a final dividend between N0.90 and N1.10 for the 2022 financial year.
Path 2: The Board of Directors maintain the pattern used in declaring 2021 dividend.
For the 2021 financial year, UBA 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 N143.62bn.
On this path, we project a dividend of N1.30 per ordinary share held by Shareholders, being the same as was paid out for the 2021 financial year.
Should I invest in United Bank for Africa Plc?
The share price of United Bank for Africa Plc is down 9.32% YTD, at its current price of N7.30, displaying the bearish sentiment that pervades the market.
At its current price, a final dividend of N1.00 will return a Dividend Yield of 13.69%, excluding 10% withholding tax.
Although the inflation has risen to above 21% and UBA’s dividend yield is trailing behind it, from a dividend perspective, UBA Dividend Yield at current prices will amount close to the best one can get on the Nigerian Exchange limited.
There is still the added possibility of UBA share price enjoying capital appreciation when the market picks up.
We therefore have a BUY rating on UBA 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
