Analyst Insight
Winning Strategies For Surviving The Current Market Downturn
By Investdata Analysts
If you are investing in the Nigerian equity market to create/participate in wealth redistribution, you must ignore the downward movements and redirect your attention to sectors, industries, and companies you need to study.
I call such companies defensive and growth entities, with strong potential for future growth, regardless of the economic slowdown and the new normal occasioned by the outbreak of the Coronavirus (COVID-19) pandemic and the resultant lockdown to check the spread, a situation that dealt severe blows on economies across the globe.
Such stocks are most likely the highly capitalized or the least-talked about companies in the market due to either their prices, dividend payout policies, or by virtue of the sub-sectors where they are listed. But they have prospects due to their bouquet of products and services, shareholding structure, market segments, and market share.
Many investors are being tossed up and down by this oscillatory trend, forcing them to exit positions, amidst panic, following which they suffered losses because of ambiguous investment goals.
On the strength of the quarterly and audited earnings so far published, many small companies are showing promises and even outperforming their big peers.
However, as investors, a close study of the growth rate of these companies and their earnings is very important, because sustainability is always a major factor to consider.
It is better to look the way of companies with average growth rate in profit of between 20 and 50% over a period of five years.
In the past 30 years, research has shown that fundamentally sound companies have rewarded shareholders twice more than the stock market in general.
Therefore, as an investor in these strong companies with good dividend payout policy, for every N15,000 you earned in dividend in the equity market, you would have made another N13,000 by way of cash and bonus issues.
Throughout this period, these companies would have offered shareholders a steady and rising stream of revenue and a return that, as I have earlier stated, was more than two times what the markets offered on the average. This calls for a clear and focus investment objective on the part of investors.
Look at the table below for payout ratio and dividend yields
| 2019 | |||||||||
| Company | EPS | Dividend | Payout Ratio | Current Price | Div. Yield | ||||
| Current | Initial | % CHG | Current | Initial | % CHG | ||||
| Afriprud | 0.84 | 0.98 | -14.29% | 0.70 | 0.50 | 40.00% | 83.33% | 4.50 | 15.56% |
| Cap | 2.49 | 2.90 | -14.14% | 0 | 2.90 | -100.00% | 0.00% | 16.15 | 0.00% |
| Cutix | 0.22 | 0.27 | -18.52% | 0.125 | 0.125 | 0.00% | 56.82% | 1.90 | 6.58% |
| Dangcem | 11.79 | 22.83 | -48.36% | 16.00 | 16.00 | 0.00% | 135.71% | 135.00 | 11.85% |
| Dangsugar | 1.87 | 1.85 | 1.08% | 1.10 | 1.10 | 0.00% | 58.82% | 12.50 | 8.80% |
| Glaxosmith | 0.77 | 0.52 | 48.08% | 0.55 | 0.50 | 10.00% | 71.43% | 5.10 | 10.78% |
| Lasaco | 0.04 | 0.10 | -60.00% | 0.05 | 0.05 | 0.00% | 125.00% | 0.33 | 15.15% |
| Learn Africa | N/A | 0.21 | N/A | N/A | 0.15 | N/A | N/A | 1.10 | 13.64% |
| Mobil | 24.64 | 25.87 | -4.75% | 8.25 | 8.25 | 0.00% | 33.48% | 175.00 | 4.71% |
| Redstarex | 0.90 | 0.79 | 13.92% | N/A | 0.43 | N/A | N/A | 3.75 | 11.47% |
| Ucap | 0.83 | 0.72 | 15.28% | 0.50 | 0.30 | 66.67% | 60.24% | 3.07 | 16.29% |
| Vitafoam | 1.82 | 0.57 | 219.30% | 0.42 | 0.25 | 68.00% | 23.08% | 5.45 | 7.71% |
| Wapco | 7.15 | -1.05 | 780.95% | 1.00 | 0 | 100.00% | 13.99% | 11.50 | 8.70% |
We see investors focusing on portfolio adjustmentss and rebalancing, by targeting companies with strong potentials to grow dividend on the strength of their earnings capacity.
Again, the current undervalue state of the market offers investors opportunities to position for the short, medium and long-term, which is why investors should target fundamentally sound, and dividend-paying stocks for possible capital appreciation for the rest of the year.
Ambrose Omordion, Chief Research Officer, InvestData Consulting Limited
info@investdataonline.com
