Dividend King: Nestlé Nigeria strong payout excites investors
Nestle Nigeria Plc, the dividend king that pays shareholders N70 per share in 2019 really did excite the market.
While the fast moving consumer goods company made N57.63 on every shares deployed for its 2019 operation, it total dividend for the year was N70. This is more than 100% payout.
Equity analysts at Greenwich stated that despite marginal uptick in its profit after tax, the company pay-out 78.08% or N45 as dividend. It had paid an interim dividend of N25 on a share during the year.
Meanwhile, Nestle Nigeria Plc. stock price hits bottom on Friday as it traded at N1,017:00, though it had peaked at N1,130:00 in the last 7-trading session on the Nigerian Stock Exchange.
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The stock market year to date performance remains unimpressive, as the company return 23.12% negative return according to data from Cashcraft.
As a result, Nestlé’s market capitalisation pitched at N806.131 billion on 792,656, 252 shares outstanding.
Equity analysts Greenwich however think that the fair value of the stock is N1, 370 but WSTC Securities saw a lower fair value at N1, 163.50.
Despite harsh business environment and increased competition for consumers’ wallets, Nestle Nigeria grew topline by 6.67% from N266.275 billion in 2018 to N284.035 billion in 2019.
This uptick performance was driven by a 10% and 5% revenue increase from the beverage and food segment of the business, respectively.
Revenue from the beverage segment grew from N98.10 billion to N107.95 billion in FY 2019,
Just as revenue from the food segment expanded from N168.17 billion to N176.09 billion.
“We attribute the sustained growth in revenue to the robust distribution network of the group as well as product packaging innovations to meet the depleting wallet of the consumers”, WSTC Securities remarked.
Analysts at Greenwich stated that decomposition of the revenue by periodicity shows that the group recorded the most robust growth in Q4 2019.
Revenue surged by 15%, marking the only double-digit growth for the year, analysts said.
“Besides the group’s brand and route to market, we believe that the sustained land border supported topline growth.
“In 2020, we project a topline growth of 7% and expect production cost to grow in tandem with revenue”, Greenwich held.
Despite recent border closure, analysts noted that growth in export by 43.6%, largely due to increased export to Ghana and Burkina Faso.
Food segment contributed the largest chunk to top line as it settled at 62% while Beverages contributed the residual 38%.
The company’s profit before tax (PBT) advanced by 19.03% from N59.75 billion in 2018 to N71.124 billion in 2019.
But higher effective tax rate drown the trend with profit after tax (PAT) increased by 6.22% from N43.008 billion to N45.683 billion.
On the other hand, cost of sales increased, though at a slower pace compared with revenue by 2% from N152.35 billion in 2018 to N155.89 billion in 2019.
Analysts believed that the mute growth in production cost was due to the significant portion of the input material sourced locally.
Consequently, gross profit rose from N113.92 billion to N128.15 billion, and gross profit margin strengthened by about 300 basis points (bps) to 45%.
Nestle pretax profit increased by 19% from N59.75 billion to N71.12 billion.
Analysts said the growth came on the back of relative stable operating expenses and a lower finance cost which declined by 11% from N2.51 billion to N2.23 billion in 2019.
However, due to a higher effective tax rate of 36% as against 16% 2018, PAT grew by 6% from N45.68 billion to N49.46 billion.
Then, earnings per share of came at N57.63k compare with N54.26 kobo in 2018.
For 2020, analysts anticipate a relatively stable production cost on the back of significant material input sourced locally.
Management declared a final dividend of N45.00k per share compare with N38.50k in 2018. This summed up full-year dividend to N70.00k per share as against N58.50k in 2018.
Dividend King: Nestlé Nigeria strong payout excites investors
