Dangote Cement Plc, Nestle Nigeria Plc and eight other listed companies have accounted for 71 per cent of the total Nigerian equities market capitalisation.
The others are Guaranty Trust Bank (GTB), Zenith Bank, Nigerian Breweries, Stanbic IBTC, Cement Company of Northern Nigerian (CCNN), Ecobank Transnational Inc. (ETI), Unilever Nigeria, and International Breweries.
Market capitalisation also known as market cap is the total value of a company’s shares. The above companies’ shares on the Nigerian Stock Exchange (NSE) are referred to as highly capitalised stocks or large-cap companies. The companies are historically known to produce high-quality goods and services.
The dividend payments are consistent and the growth is steady. They often tend to dominate their industries. Also, large-cap stocks tend to be considered fairly conservative investments when compared to their mid-cap and small-cap counterparts and do not pose as much risk. In return, the growth potential is a lot less aggressive.
The market capitalisation of the equities refers to the value of all the 168 equities listed on the NSE, which stood at N11.839 trillion as at February 28, 2019.
Meanwhile, of the 168 equities, 10 accounted for N8.428 trillion market capitalisation, representing 71.19 per cent of the total market capitalisation.
Dangote Cement has the highest capitalisation of N3.38 trillion or 28.55 per cent. Nestle Nigeria followed with a market capitalisation of N1.165 trillion while GTB has N1.040 trillion capitalisation.
Zenith Bank accounted for N750.376 billion, Nigerian Breweries valued at N635.754 billion, Stanbic IBTC Holdings accounted for N475.674 billion.
Others are CCNN, ETI, Unilever and International Breweries with market capitalisation of N262.870 billion, N256.894 billion, N235.545 billion and N225.641 billion, respectively.
Capital market analysts said that these stocks, most of the time, determine the direction of the market because of their level of market capitalisation, noting that that is why they are often referred to as bellwethers. They observed that investors are always attracted to them because they pay dividends regularly.
Six of the companies have already announced dividends for the year ended December 31, 2018. They are Dangote Cement with a dividend payout of N16 per share while Nestle Nigeria proposed a dividend of N38.50 per share. Zenith Bank, GTBank, Stanbic IBTC Holdings and Nigerian Breweries declared N2.50, N2.45, N1.50 and N1.83, per share respectively.
The managing director of APT Securities Limited, Mallam Kurfi Garuba, said that the stakes controlled by these 10 companies, especially Dangote Cement on NSE, are highly significant.
According to him, that is why Dangote Cement, for instance, determines the direction of the market most times. Whenever there is any price drop in Dangote Cement, the market will decline and if there is a rise in the shares of Dangote Cement, the market closes positively.
The chief operating officer of InvestData Consulting Limited, Mr. Ambrose Omordion, said that highly capitalised stocks or companies experience less volatility on the trading in the market because their goods and services are proven on both a national and international scale.
He said that investors see them as more attractive on account of their stability and also the fact that they tend to offer consistent dividends, which makes them a better bet for conservative investors.
Omordion stated that “as an investor, your portfolio should be balanced, contain an appropriate mix of large, small and mid-cap stocks. To determine what the proper mix is, you will need to determine your financial goals, time horizon, and tolerance level for risk.
“All the same, a diversified portfolio will spread out investors risk and help them attain their financial goals more easily,” stated.
Also, a financial analyst and stockbroker with Calyxt Securities Limited, Mr. Tunde Oyediran, said that the companies listed are the major movers of the stock market activities in any trading day, stressing that their trading direction determines the performance of the market, either up or down movement.
He pointed out that those stocks are highly favoured by foreign and institutional investors, adding that activities of the investors in the stocks will not allow them to fall beyond a certain price before they reverse back.
He explained that the stocks are less volatile when compared to other stocks on the market, noting that “this is why investors like playing along with high capitalised stocks.”
Oyediran, however, said that the equities market should have more stocks than what “we have that will control market activities”, declaring that the “Nigerian stock market is not deep enough.”
According to Oyediran, “this is why we are clamouring for the listing of telecommunications and oil exploration firms on the NSE so that we can have more companies with high capitalisation.”
He added that it would not only help to deepen the market but also contribute greatly to the growth of the Nigerian economy.
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