Investors’ appetite for high dividend stocks pushes index by 2.63%

Capital market. Photo: SHUTTERSTOCK

 By Helen Oji

The nation’s stock market closed transactions for the second trading week of the year on a high note, as the market continued to record an early boom, following investors’ increased appetite for stocks with attractive yields ahead of the full Year 2020 dividend declarations.

Last week, the Nigerian Stock Exchange (NSE) recorded gains in all the trading sessions of the week with the All-share index and market capitalisation appreciating by 2.63% to close the week at 41,176.14 and N21.530 trillion, respectively.

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Similarly, all other indices finished higher with the exception of NSE Growth which depreciated by 3.32% while the NSE ASeM Index closed flat.

Analysts at the weekend expressed optimism on a sustained bull run, as investors target blue-chip and undervalued stocks in anticipation of a bumper harvest in the current financial year.

For instance, analysts at Codros Capital said: “In the short term, we expect the bulls to retain dominance in the market given positioning for FY 2020 dividends amid negative real returns in the fixed income market even as we do not rule out intermittent profit-taking.

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“However, we advise investors to take positions in only fundamentally justified stocks as the weak macro environment remains a significant headwind for corporate earnings.”

Similarly, analysts at Investdata Consulting Limited, urged investors to target stocks offering strong sales or revenue growth in 2021, as this is expected to support increased earnings per share, that would ultimately become the main driver of returns this year.

A look at the market performance last week showed the market reopened on Monday, with a marginal gain caused by appreciation in highly-capital stocks with the ASI rising by 0.08 per cent.

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At the close of transactions, the ASI gained 30.56 absolute points, representing a growth of 0.08 per cent to close at 40,150.78 points.

Similarly, the overall market capitalisation value rose by N16 billion to close at N20.994 trillion.

The positive performance was also driven by price appreciation in medium and large value stocks such as Ardova Plc, Presco, Flour Mills of Nigeria, Berger Paints Nigeria and Okomu Oil.

A spike in the share price of Dangote Cement (DANGCEM), and 26 others, lifted the market capitalisation of the NSE by N76 billion on Tuesday.

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But decline in heavyweight stocks such as; Guaranty Trust Bank, BUA, and MTNN dragged the ASI to the negative region at mid-day.

However, a late spike in the share price of DANGCEM (+222bps), coupled with gains in Ardova and Unilever returned the market to a positive territory at the end of Tuesday’s transactions.

Consequently, the ASI expands by 145.17 absolute points, representing an increase of 0.36 per cent to close at 40,295.95 points. Similarly, the overall market capitalisation value gained N76 billion to close at N21.070 trillion.

Following sustained bargain-hunting in the shares of most blue-chip stocks, the market extended a bullish run to three consecutive sessions, as the ASI increased further by 0.11 per cent.

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At the close of transactions Wednesday, the ASI expanded by 45.10 absolute points or 0.11 per cent increase to close at 40,341.05 points. Similarly, the overall market capitalisation gained N24 billion to close at N21.094 trillion.

The market gain was piloted by price appreciation in medium and large value stocks, including; Mobil Nigeria, Flour Mills of Nigeria, BOC Gases, Seplat Petroleum Development Company, and Ardova Plc.

For four consecutive sessions, sustained bargain-hunting in the shares of blue-chip stocks pushed the market capitalisation up by N325 billion.

At the close of trading on Thursday, the ASI gained 622.09 absolute points, representing a 1.54 per cent increase to close at 40,963.14 points.

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Similarly, the overall market capitalisation appreciated by N325 billion to close at N21.419 trillion.

The uptrend was driven by price appreciation in medium and large capitalization stocks such as Seplat, Dangote Cement, MTN Nigeria Communications, Ardova Plc, and NASCON Allied Industries.

A turnover of 3.447 billion shares worth N32.725 billion was recorded in 30,327 deals by investors on the floor of the Exchange, higher than a total of 3.394 billion units worth N19.867 billion that exchanged hands in 26,808 deals during the preceding week.

The financial services industry (measured by volume) led the activity chart with 1.714 billion shares valued at N13.352 billion traded in 15,102 deals; thus contributing 49.74% to the total equity turnover volume.

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The construction/real estate industry followed with 768.131 million shares worth N4.203 billion in 430 deals.

The conglomerate’s industry came with a turnover of 279.799 million shares worth N578.694 million in 1,199 deals.

Trading in the top three equities namely UPDC Real Estate Investment Trust, Mutual Benefits Assurance Plc, and Transnational Corporation of Nigeria Plc (measured by volume) accounted for 1.224 billion shares worth N4.459 billion in 929 deals, contributing 35.52% to the total equity turnover volume.

A total of 11,420 units of bonds valued at N12.325 million were traded last week in 17 deals compared with a total of 10,051 units valued at N12.591 million transacted in 27 deals during the preceding week.

About 60 equities appreciated at price last week, higher than 50 equities during the preceding week, while 19 equities depreciated in price, lower than 21 equities in the preceding week.