Investors preparing for the shares market’s dividend rule

Because many firms have informed investors of their board meetings to approve audited results and suggest dividend for the financial year ended 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.

Even though Treasury Bills’ primary market auction rates increased in the most recent offer, moving to 1.44%, 6%, and 10% respectively for 91 days’, 182 days’, and 364 days’ tenors, with oversubscription at the end of the offer, a situation that may likely threaten the equity market, market analysts noted that buying interests in large cap companies that announced their dividends supported stock rebounds.

They also mentioned that the Central Bank of Nigeria’s (CBN) aims to raise about N2 trillion in the second quarter of 2023, which could cause the stock market to become even more volatile.

Trade research for the previous week revealed that the local stock exchange continued to rise for a third week in a row, mostly due to advances in equities like MTN, which rose 1.4%, and Dangote Cement, which rose 3.6%.

The NGX All-Share Index, ASI increased by 0.5% week over week to close at 55,794.51 points. The Year to Date return was 8.9%, and the market capitalization was N30.395 trillion, up from N30.249 trillion the previous week.

As trade volume fell by 46.4% while trading value increased by 18.6% W/W, activity levels were mixed.

We expect mixed sentiments and a correction after the market forms a hammer candlestick in an uptrend on high volume, just as investors position for dividend declaration in anticipation of more financials, according to experts at InvestData Consulting in response to the market’s performance. To safeguard their portfolios before the governorship election and after the dividend adjustment, market participants target dividend-paying corporations and defensive equities. At this point, any downturn could strengthen upward potentials.

Investors ought to benefit from price corrections as a result.

In addition, they stated: “With the election season gradually coming to an end, despite the governorship and state assembly elections being moved by one week to March 18, 2023, it is anticipated that political apprehension and uncertainty will decline because continuity that encourages investment inflow is being established in the midst of an earnings reporting season.

As a result, it was anticipated that traders and investors would continue to play the market while anticipating the publication of additional audited data, which would likely cause fluctuations in equity prices. Additionally, it is anticipated that corporate measures such as dividend increases and other corporate actions would encourage oscillation that, if everything else is equal, will support a positive trend in Q2 and open up fresh entry points for market participants.

“We expect market performance to be dominated by the bulls in the week ahead, as we expect investors to take positions in equities with attractive dividend yields,” said analysts at Cordros Research in response. Yet, as sporadic profit-taking activities are expected to continue, we anticipate an undulating pattern to form. Overall, given that the negative economic story continues to be a substantial headwind for corporate earnings, we urge investors to look for trade opportunities in only fundamentally justifiable stocks.