Over the 7 operation days closing on Dec 24, the value of Dangote Cement has jumped by 605 billion naira on the Lagos Stock Exchange, data provided by Capital IQ showed. This increase has supported the company’s stock performance with a stock that was already up 72.5% since the year started.
The good performance has made Aliko Dangote’s company the best dividend yield performer in Africa’s top 20 listed companies. The company’s share has also outperformed that of MSCI Frontier Market, a market index that follows the performance of the top 100 companies in selected financial markets, including Nigeria.
Dangote’s performance was already hinted with the announcement of solid financial results over the first nine months of 2020. The company’s net profit over the period was 208.6 billion naira, up 35.2% YoY. The good news reinforced investors’ confidence that future dividends will also be high.
On December 11, the company announced it will start the first phase of its share purchase program on December 30. The strategy will enable investors who have put their money into the company’s capital, since nine months ago, to make capital gains. As a reminder, in January 2011, an investor paid 104 naira to purchase the share of this company. In the meantime, the company has already paid this investor about 84 naira in accumulated dividends per share. The company says it will now pay him more than twice his initial investment.
Profitability will be higher for investors who will remain after the buyback program, because the number of shares between which the dividend is distributed will be lower. This scenario added to the good financial results motivate the strong interest from investors in the company. Also, the value of Dangote Cement will continue to grow. The company is the first in Africa in the construction sector, both in terms of stock market value and turnover.
However, Dangote has a stock price to earnings ratio of 16x, which is relatively low when compared to African companies operating in the same field, but with a smaller financial size. The returns it brings to investors in terms of capital gains and dividends are also far more attractive than the returns on 10-year loans from the Government of Nigeria.