One of the sweetest/orgasmic feelings one can get as an investor is the alert of cashflow into one's bank account from one's passive investments- more like getting your money to work for you while you sleep. Once the initial investment is made, without any extra effort on your part, you just receive regular inflow of cash either as interest or dividend payments. That is what a good Passive investment looks and feels like. If you have not had this feeling before, make a promise to yourself to avail yourself such privilege immediately after reading this article. You deserve it.
In some of our previous articles we had outlined some passive income investment options available for investors to take advantage of- Money market funds, Commercial Papers, etc. Click on the links to read. It is always a pleasure to see testimonials from beneficiaries of information from our articles, sharing their experiences receiving their first passive investment income, and the feeling thereof. In the journey of Investing, Information is key, tantamount to "Location, Location, Location" in real estate conversations. And Cowryvest exists to democratize Investment education and information to help you in your investment journey.
What is a Dividend Paying Equity Investment
In this article let's focus on another option for Passive Income Investments which retail investors (beginners or experienced) can participate in- Dividend Yielding Equity Investment. Equity investment implies investing in part-ownership of a business or an asset. So in simple terms, in this article we are referring to investing in part ownership of a business that pays you dividends periodically. This can be done in privately held businesses or publicly traded businesses. And how can one easily invest in part ownership of publicly held businesses? Through the Stock market - by simply buying stocks of your preferred businesses/companies. When you invest in part ownership of a business or asset, you either expect returns via Capital appreciation (the value of your investment or capital increasing over time) or Dividends (the company pays you some part of their profit as a reward for being a part owner), or both. For many investors, Capital appreciation is their focus, however, it usually leads to speculation driven investments in stock ticker symbols which usually do not end well.
How to Invest in Dividend Paying Companies
There are a good number of publicly held Businesses or companies that pay regular periodic dividends, either monthly, quarterly or annually, and some of them have quite attractive dividend yields, sometimes as high as 10% or more. Buying shares of such companies guarantees the shareholder regular flow of income from the dividends that those companies pay. The sweet spot is when you invest in a business that pays dividends regularly and also has growth potential which translates to both capital appreciation of your investment and dividend growth over time. It is like part ownership of a real estate asset in a highbrow location with the double advantage of consistently growing annual rent and significant property value appreciation. The onus lies on the investor to do your due diligence in seeking out these kind of companies, and making regular investments in them when they are undervalued. Some savvy investors even go as far as planning their portfolios in such a way that they receive dividends every month from different companies in their portfolio (either interim or final dividend for the Financial year)- e.g. company A pays dividend in January, Company B in February, Company C in March, e.t.c. That way, they would have regular cash flow to offset expenses on a monthly basis. This is passive investment at work.
Examples of Nigerian Dividend Paying Companies
Here are some companies in Nigeria that pay regular dividends. However, note that this is not investment advice, and past performance is not indicative of future results. Do your own research.
- Banks: A number of Nigerian Banks pay good dividend and investment in their stock can be a good means of generating passive income. For example, Zenith Bank PLC, Guaranty Trust Holdco, United Bank for Africa PLC, Access Holdco, Fidelity Bank PLC have all been paying regular dividends, some of which pay twice yearly (Interim dividend and Final dividend). And depending on the price at which you buy their shares, could yield up to 10% dividend yield or more. Most of them have also seen their share price appreciate over time, which has served for Capital appreciation too.
- Consumer Goods: Companies such as Nestle Nigeria PLC, Nigerian Breweries PLC, NASCON Allied Industries PLC, Bua Foods, Guinness Nigeria PLC have also been paying regular dividends. Their dividend yields might not be so high, but they are regular. And owning their shares can be a source of passive investment both for Capital appreciation and regular dividends.
- Agriculture: Presco PLC and Okomu PLC are the leaders in this sector, and have been paying regular dividends, sometimes up to thrice in a year. They have also been growing, hence leading to share price appreciation and dividend growth.
- Conglomerates: Custodian Investment PLC, Transnational Corporation, and UACN PLC are the leaders in this sector, and have been paying regular dividends, with good share price appreciation too.
- ICT: MTN Nigeria PLC, Airtel Africa PLC, CWG PLC, to name a few, are on record to have been paying dividends over the years. Airtel Africa has in recent times been doing some share buy backs too, which is good for capital appreciation.
- Oil and Gas: Seplat Energy, Aradel Holdings, Total Energies Marketing Nigeria PLC are the leaders in this sector, and have been paying dividends historically. From our last check, Seplat has actually been paying dividends quarterly and in Dollars.
There are several other publicly traded Nigerian companies not mentioned here which have historically been paying regular dividends, that shrewd dividend focused investors can tap into to ensure regular inflow of cash dividends to their bank accounts, which they can in turn choose to reinvest to set the compounding snowball in motion- Julius Berger PLC, Learn Africa PLC, Nigerian Aviation Handling Company PLC, CAP PLC, Dangote Cement PLC, Lafarge Africa PLC, United Capital PLC, etc.
Conclusion
In summary, one of the passive income investments you can make that would guarantee regular inflow of cash into your bank account is in dividend paying stocks (equity investment in dividend paying companies). And you will do well to look in this direction, research on it and consider including it in your portfolio to diversify income streams and ensure regular cashflow both to offset expenses and to reinvest. As mentioned earlier, do your own research and ensure that whichever company you choose to invest in aligns with your investment objectives.
To find out how to invest in the Nigerian Stock market, check out this article: How to start investing in the Nigerian Stock Market.
Happy investing!
DISCLAIMER: All contents on this website are for informational purposes only and should not be taken as any form of investment advice. Do your own research and contact your financial advisor before making any investment decision. All contents may not be reproduced, distributed, or used without prior written permission.
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