On 27th October, 2022, Zenith Bank Plc (NGX: ZENITHBANK) released its financial statements for period ended 30 September 2022, posting a profit of N174bn profit for the period.
On Yochaa’s list of best stocks on the Nigerian Exchange Limited by Dividend Yield, Zenith Bank Plc ranks #3, with a 5 year average yield of 12.61%.
In this series of “Dividend Stocks to watch on the Nigerian Exchange ahead of 2023,” we take a look at the prospects of ZENITHBANK’s 2022 financial year dividend payout to Shareholders.
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Zenith Bank Plc is another 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 N2.75, N2.80, N2.80, N3.00, and N3.10 respectively.
Investogist Analysts have analyzed the historical trends of Zenith Bank 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 Zenith Bank Plc will pay for this financial year.
Our analysis of the past 5 years shows that ZENITHBANK has followed up the profits it reports in the 9 months period with a full year profit.
- 2017: It reported a profit of N129.23bn for the 9 months (9M) ended 30 September 2017, and reported a profit of N173.79bn for the full year period ended 31 December 207. This represented a 34% difference between the 9M and the full year,
- 2018: In this year, profit continued to climb, as Zenith reported profit after tax of N144.17bn in 9M, and N193.42bn in the full year. The difference between the two was the same 34% calculated between the two in the preceding year.
- 2019: The trend remained, as a 39% difference between the N150.72bn profit in 9M and N208.84bn in the full year was existed.
- 2020: The gap between 9M and Full year profits itched up to 45%, with the year profits standing at N230.56bn, while the 9M profit stood at N159.31bn.
- 2021: The gap between 9M and Full year profits itched forward up to 52%, with the year profits standing at N244.40bn, while the 9M profit stood at N160.59bn.
We use 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 22%.
Investogist analysts therefore estimated that for the full year period to end 31 December 2022, Zenith Bank Plc will report a profit of N245.49bn.
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 N173.79bn, the company paid a total dividend of N2.45 for every one of its outstanding shares. The total amount paid as dividend amounted to 44% of the company’s profit for the year.
- 2018: The company increased its dividend payout to N2.80, representing 45% of the N193.42bn profit earned in the year.
- 2019: The company maintained its dividend at N2.80, paying out 42% of its N208.84bn profit as dividend.
- 2020: The company increased its dividend to N3.00. This amounted to 41% of its profit for the year, which was N230.56bn.
- 2021: Zenith Bank pushed the dividend further to N3.10, which took 40% of its N244.40bn profit.
We calculated that the company’s 5 year average percentage of its profit paid as dividend is 42%, and thus project that the Board of Directors’ dividend proposal will fall in this region.
With a projected full year profit of N245.49bn, we expect ZENITHBANK to pay 42% of this as dividend, which will amount to N3.30 dividend per ordinary share. The bank has already paid an interim dividend of N0.30, thus we expected a final dividend of N3.00.
Establishing a 10% range on our estimation, we can project that ZENITHBANK Shareholders will receive a final dividend between N2.70 and N3.30 for the 2022 financial year.
Path 2: The Board of Directors maintain the pattern used in declaring 2021 dividend.
For the 2021 financial year, ZENITHBANK used 40% of its profit to pay dividend to Shareholders, should the Board tow the same line, the company will pay 40% of our projected profit of N245.49bn.
On this path, we project a dividend of N3.10 per ordinary share held by Shareholders, being the same as was paid out for the 2021 financial year.
Should I invest in Zenith Bank Plc?
The share price of Zenith Bank Plc is down 20.55% YTD, at its current price of N20.10, displaying the bearish sentiment that pervades the market.
At its current price, a final dividend of N3.00 will return a Dividend Yield of 14.92%, excluding considerations of 10% withholding tax.
Although the inflation has risen to above 20% and Zenith’s dividend yields trailing behind it, from a dividend perspective, Zenith Bank Dividend Yield at current prices will amount close to the best one can get on the Nigerian Stock Market.
There is still the added possibility of ZENITHBANK share price enjoying capital appreciation when the market picks up.
We therefore have a BUY rating on ZENITHBANK stocks, however the Investor should be prepared to take any opportunity the bear market may present to buy these shares at even lower prices.
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