Investors Shift To Low Priced Stocks On Higher Yield

Investors appeared to be showing increasing consideration for low-priced equities, otherwise known as penny stocks, as steep decline in share prices and encouraging earnings by small and mid-tier companies enhance the attractiveness of these companies.Penny stocks in the capital market parlance are equities with relatively lower prices, in which investors can make money quickly in terms of capital appreciation or better returns in terms of dividend or bonus issues.Low-priced stocks have accounted for average of 40 per cent of weekly transactions at the stock market in recent months, with penny stocks dominating the activities charts every week.Trading reports at the Nigerian Stock Exchange (NSE) showed that penny stocks have been the most active stocks over the weeks, in what market analysts regarded as a shift of emphasis from liquidity to potential for higher dividend yield and capital appreciation.In the immediate past week, three stocks which trade between 50 kobo and around N1 were the most active. The trio of Fidelity Bank, FCMB Group and Standard Trust Assurance Plc accounted for 57.1 per cent of total turnover volume at the Exchange. The three financial services companies recorded turnover of 679.949 million shares worth N639.862 million in 1,622 deals, representing 57.06 per cent and 10.60 per cent of the total equity turnover volume and value respectively. Total turnover for the four-day trading session stood at 1.19 billion shares worth N6.04 billion in 11,820 deals.The managing director, Cowry Asset Management Limited, Mr. Johnson Chukwu, said the shift to low-priced stocks was driven by expectation of higher returns by investors as many low-priced stocks have braced the odds to declare impressive earnings.He pointed out that the dividend recommendations by Fidelity Bank and FCMB Group had salutary effect on transactions on low-priced stocks. Fidelity Bank, which was trading at 80 kobo, declared a dividend per share of 14 kobo, representing a dividend yield of 17.5 per cent, substantially higher than returns by many fixed-income securities. FCMB Group, which had traded around same 80 kobo, declared a dividend per share of 10 kobo, representing a dividend yield of 12.5 per cent.Also, the chief operating officer, GTI Capital Group, Mr Kehinde Hassan, said investors have seen the potential for higher returns by low-priced stocks and were taking early positions ahead of the first quarter earnings.With most of the financial services stocks leading the penny stocks rally, financial services sector last week accounted for 85.1 per cent and 50.9 per cent of total turnover volume and value respectively. Financial services sector recorded a turnover of 1.01 billion shares valued at N3.07 billion in 6,700 deals.
Click here to read full news..