Investors Take Position in Dividend Stocks Ahead of Earnings Season
The Nigerian Exchange (NGX) records more selloffs than bargain hunting, though transactions data shows that there was portfolio rebalancing as equity investors are taking positions in stocks with higher dividend yield ahead of earnings season.
The financial year 2021 earnings season will usher in audited financial statements for the year on the Nigerian Exchange. Ahead of dividend announcements, the local market saw buying interests.
This week, the Nigeria Exchange All-Share Index rose by 1.4% to close at 44,454.67 points following bargain hunting BUAFOODS (+24.1%), DANGCEM (+8.0%), GUINNESS (+5.8%), and INTBREW (+5.1%).
Also, the Nigerian bourse year to date gain increased to 4.1%. Stockbrokers said activity levels were weaker than in the prior week, as trading volume and value declined by 22.4% and 44.8% week on week respectively.
Analysing by sectors, the Industrial Goods (+3.6%), Banking (+2.5%), and Oil and Gas (+1.7%) indices posted gains. On the flip side, the Consumer Goods (-4.4%) and Insurance (-1.5%) indices declined.
Read Also: BUAFOODS, DANGCEM, UBA Drive Mid-Day Rally on NGX
In the short term, Cordros Capital analysts said they expect the bulls to retain dominance in the market given positioning for 2021 dividends as institutional investors continue to search for clues on the direction of yields in the fixed income market.
Notwithstanding, analysts at the firm advise investors to take positions in only fundamentally justified stocks as the weak macro environment remains a significant headwind for corporate earnings.
Despite record losses in three out of five trading sessions, market capitalisation increased to ₦24 trillion on Friday. Market data shows that average volume and value traded dipped 36.9% and 55.7% respectively to 405.7 million units and ₦9.8 billion.
Top traded stocks by volume were TRANSCORP (303.2m units), BUAFOODS (154.7m units), and FBNH (67.1m units) while BUAFOODS (₦9.4bn), SEPLAT (₦2.5bn), and DANGCEM (₦1.9bn) led trades by value, according to Afrinvest market note.
Afrinvest stated that sector performance within the firm’s coverage was mixed as 3 indices gained while 3 lost. The Industrial Goods index led gainers, up 3.6% week on week on the back of gains in DANGCEM (+8.0%) which announced the commencement date for tranche II of its share buyback program.
Trailing, the Oil & Gas and Banking indices advanced 1.7% and 0.8% w/w respectively, following buying interest in SEPLAT (+3.8%), ETERNA (+9.8%), WEMABANK (+4.7%), and UBA (+3.1%).
Conversely, the Consumer Goods index led laggards, down 4.4% w/w due to selling pressure on NESTLE (-7.8%) and UNILEVER (-5.7%). Likewise, losses in MTNN (-3.6%), MBENEFIT (-12.9%), and WAPIC (-5.9%) drove the AFR-ICT and Insurance indices lower by 1.8% and 1.5% week on week respectively.
Investor sentiment as measured by market breadth waned to 0.9x from 1.3x recorded in the previous week as 30 stocks gained against 33 stocks that declined.
The top outperformers for the week were BUAFOODS (+24.1%), TRANSCORP (+16.3%), and FIDSON (+13.6%) while MBENEFIT (-12.9%), BERGER (-9.9%), and NNFM (-9.7%) led the laggards.
In the coming week, Afrinvest expects stock market performance to be a mix of profit-taking and bargain hunting activities. #Investors Take Position in Dividend Stocks Ahead of Earnings Season
