August 27, 2018

Investors hunting for high dividend yield, penny stocks

By Nkiruka Nnorom

As the market continues in search of positive triggers following the protracted bearish run, operators in the capital market have said that investors will direct their attention to high dividend yielding stocks as well as the penny stocks this week.

Stock Market

Also,  given that quarter two 2018, (Q2’18) earnings season is closing out, local and international geopolitical events and policy changes may likely impact on the local bourse in line with global equity outlook.

The bearish sentiment in the domestic market was reversed last week as gains in  Dangote Cement Plc, which rose by 6.8 percent buoyed the All Share Index, ASI, on the last two trading sessions of the week, resulting in 0.5 percent increase in the benchmark index. Consequently, the ASI settled at 35,426.21 points from  35,266.29 points in the previous week. Similarly, investors gained N58 billion as market capitalisation rose to N12.933 trillion as against  N12.875 trillion in the preceding week.

However, analysts at Afrinvest Securities said that despite the positive performance, investors’ sentiment on bellwethers remained weak and may further pressure the market this week. “Nevertheless, we expect appetite for penny stocks to stay upbeat as noticed this week” they added.

Analysts at Cowry Asset Management opined that the market would close flat in the red territory as sell-offs by foreign portfolio investors and the attractive fixed income investment amid increasing yields continue to weigh on the market prices.

“We opine that investors should hunt for companies with potentially high dividend yields and have recorded increased earnings as at half year (H1) 2018”, Afrinvest analysts stated.

The analysts at Cordros Capital, another Lagos based investment house, noted in their report that  outlook for equities would remain conservative in the near to medium term in the absence of a near term one-off positive catalyst.

A review of activity last week showed that performance across sectors was bearish as three of the five sectors weakened week-on-week. The industrial goods and insurance sectors were the best performing, up two percent and 0.8 percent respectively as a result of gains in Dangote Cement Plc  (+6.8%), Aiico Insurance Plc (+2.9%) and Lasaco Assurance Plc  (+3.2%).

On the flipside, the banking sector led the laggards, shedding three percent on the back of losses in Guaranty Trust Bank Plc  (-1.3%) and Zenith Bank Plc (-3.9%). Similarly, the consumer goods and oil and gas sectors went down by 2.2 percent and 0.2 percent respectively as sell pressures in Flour Mills of Nigeria (-2.3%), Unilever Nigeria Plc  (-4.7%), Nigerian Breweries Plc  (-2.9%), Total Nigeria Plc  (-3.0%) and Forte Oil Plc (-0.6%) dragged both sectors down.