Investors Preparing For The Dividend Rule In Stock Market

Because many firms have informed investors of their board meetings to approve audited results and suggest dividend for the financial year ending December 2022, investors are preparing for dividend on the Nigerian Exchange Limited, or NGX, which dominates the equity market.
The investors already have knowledge of what is anticipated to be distributed as dividend thanks to the unaudited accounts.

Market analysts noted that buying interests in large cap companies that announced their dividends supported stock rebounds, even when Treasury Bill’s primary market auction rates adjusted upwards in the last offer, as rates moved to 1.44%, 6% and 10% respectively for 91days, 182days and 364 days’ tenors with oversubscription at the end of the offer, a situation that may likely threaten the equity market.

They also added that plans by the Central Bank of Nigeria (CBN) to raise over N2 trillion in the second quarter 2023, may lead to a further spike in stock market volatility.
Trading analysis for last week showed that the local bourse extended its bullish run for the third consecutive week, primarily driven by the gains in recorded by Dangote Cement at 3.6% and MTN’s 1.4% among other stocks.

The NGX All-Share Index, ASI gained 0.5% Week on Week, W/W to close at 55,794.51 points, with the Year to Date, YtD return settling at 8.9% as the market capitalisation closed at N30.395 trillion from N30.249 trillion penultimate week.

However, activity levels were mixed, as trading volume declined by 46.4% while trading value grew by 18.6% W/W.

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Reacting on market performance, analysts at InvestData Consulting stated:” We expect mixed sentiments and correction after forming a hammer candlestick in an uptrend on high volume, just as investors position for dividend declared in expectation of more financials. Market players target dividend paying companies and defensive stocks to protect their portfolios ahead of the governorship election and post dividend adjustment. Any pullback at this point may add more strength to upside potentials.

As such, investors should take advantage of price correction.”
They also added: “With the election season gradually winding down, despite the one week shift in the governorship and state assembly elections to March 18, 2023, it is expected that political uncertainties and fear will reduce, since the continuity that supports investment inflow is being built in the midst of an earnings reporting season. As such, it expected that traders and investors will continue to play the market, waiting for the release of more audited results, a situation likely to drive equity prices up and down. Also, it is expected that dividend adjustments and other corporate actions will support oscillation that will create new entrance for market players, especially traders in the post dividend adjustment period which is expected to support positive trend in Q2 all things being equal.”

Also reacting, analysts at Cordros Research stated: “We expect market performance to be dominated by the bulls in the week ahead, as we expect investors to take positions in stocks with attractive dividend yields. However, we envisage an undulating pattern will emerge as intermittent profit-taking activities will likely persist. Overall, we advise investors to seek trading opportunities in only fundamentally justified stocks as the weak macro story remains a significant headwind for corporate earnings.

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