Dividends: Is Stanbic Browbeating The Big Banks?

The decision by Stanbic IBTC to pay a mouth-watering N4 final dividend to its shareholders for the year 2020, has again brought to focus the varying dividend policy postures of Nigerian banks.

The N4 paid by Stanbic is the highest paid by any bank so far for the 2020 financial year. The payment shockingly beat the payout by even bigger banks including the big five, namely First, UBA, Guaranty, Access and Zenith otherwise known as FUGAZ.

Though the FUGAZ are generally regarded as bigger in all dimensions than Stanbic IBTC, the later shocked the markets by paying out more than any of the big five.

Even more, Stanbic IBTC further toasted its shareholders by giving out a bonus of 1 for 6.

Investment analysts have affirmed that the payment by Stanbic reflects the dividend policy of the bank as compared to the FUGAZ.

Companies may operate a liberal or a conservative dividend policy. Companies which return large proportion of their earnings to shareholders delight their investors with immediate returns.

Companies which pay moderate or smaller fractions of their earnings to their shareholders are said to operate a conservative dividend policy. While not translating to immediate gains, the policy pays the investor in the long run as the withheld cash is added to the shareholders’ fund which in turn help to boost share value.

In that regards, Zenith, GTB shareholders would in the long run benefit as the values of their shares would rise in the long run. They are able to reap when they sell their shares.

However, what has interested Nigerian investment analysts is that Stanbic IBTC in real terms was not much of a laggard compared to the FUGAZ in EPS returns in the year 2020.

Surprisingly, the bank by the records available to  GreenWhiteGreen GWG beat Guaranty in earnings having returned N7.11 to the N6.05 returned by Guaranty.

It, however, did not beat Zenith which with the accolades it has received from home and abroad remains Nigeria’s most profitable bank having garnered an EPS of N7.43.

With its N4 handout to shareholders, Stanbic IBTC paid out 56% of its earnings while Guaranty paid out 49% of its earnings. Zenith on the other hand paid out 40% of its earnings according to a dividend policy that has been consistent with the bank.

As a market operator said “Zenith or Guaranty could have afforded to have paid even more than the N4 paid by Stanbic IBTC without any effect on them but banks and companies indeed have their dividend policies and they are operating within it.”

However, the threat to companies with liberal dividend payments is that they may erode shareholders’ fund to keep to the policy. They are, however, at risk when trials come as in a climate like Nigeria.

However, in the case of a bank like Zenith even if still watering their shareholders with a satisfactory dividend they also have kept enough shock absorber to ride the storm whenever it comes.

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