Eurozone Growth Likely To Accelerate In Q2 On Wider Trade Surplus – 17 July 2017, 18:13
The rise in the euro-zone’s trade surplus in May indicates that GDP growth likely accelerated in the three months to June and trade is set to continue boosting growth in the coming quarters, Jennifer McKeown, an economist at Capital Economics, said. Official data released on July 14 showed that the seasonally adjusted trade surplus grew to EUR 19.7 billion in May from EUR 18.6 billion in April. The increase in May was mainly driven by a 2.1 percent monthly rise in exports, which outpaced the 1.6 percent increase in imports and left the annual growth of export values at a healthy 9.4 percent, the economist observed. Among countries, the German trade surplus climbed to EUR 20.3 billion in May from EUR 19.8 billion in April, while the French deficit narrowed from EUR 5.6 billion to EUR 4.9 billion – its smallest this year. McKeown noted that the Eurozone trade surplus in June was still smaller than it was this time last year, partly reflecting the rise in oil prices. “Monthly trade volumes data, which are less timely than values data, have shown annual export growth outpacing that of imports this year, in stark contrast to the situation in 2016,” the economist pointed out. Though the monthly goods trade values data are not a great guide to the goods and services trade volumes data used to construct GDP, the latest monthly industrial production and retail sales data suggests that GDP growth may have exceeded Q1’s 0.6 percent rise in the second quarter, the economist said. McKeown expects export growth to rise further in the coming months, with global demand in good health and the euro exchange rate still at a fairly low level by past standards. “Net trade should therefore boost euro-zone GDP growth over the next year or so, although that support is likely to fade by 2019 as the euro appreciates and growth slows elsewhere,” McKeown predicted.
New York Manufacturing Index Falls More Than Expected 17 July 2017, 18:42 – Activity in the New York manufacturing sector grew at a notably slower pace in the month of July, according to a report released by the Federal Reserve Bank of New York on Monday. The New York Fed said its general business conditions index dropped to 9.8 in July from ‘19.8 in June, although a positive reading still indicates growth. Economists had expected the index to fall to 15.0

Crude Oil Holds $46 After Rig Count 17 July 2017, 18:16 – Crude oil futures continued to inch higher Monday morning amid signs of strong demand from China. China’s economy expanded at a steady pace in the second quarter on domestic spending and exports despite measures taken to rein in financial risks. Gross domestic product grew 6.9 percent year-on-year, the same pace of expansion as seen in the first quarter, the National Bureau of Statistics said Monday. The annual growth was forecast to slow to 6.8 percent. Crude oil extended recent gains despite Friday’s report from Baker Hughes data showing the number of active U.S. rigs drilling for oil edged higher by two to 765 rigs this week. WTI light sweet oil was up 8 cents at $46.55 a barrel, staying well away from June’s yearly lows near $42. Among the few economic reports on tap, the New York Federal Reserve’s Empire State Manufacturing Survey for July will be released at 8:30 a.m. Eastern Time today.

Treasury Bills Auction for 19/7/2017 (Enjoy Upfront Interest)

Please be informed that there will be a primary auction of Nigerian Treasury bills on Wednesday, 19th July, 2017 for the following maturities:

91 DAYS 19-OCT-17 36,786,994,000 36,786,994,000
182 DAYS 18-JAN-18 39,175,905,000 39,175,905,000
364 DAYS 19-JUL-18 129,000,000,000 129,000,000,000

Below are the rates in the secondary market obtained from the FMDQ OTC Securities Exchange as at 13th of July, 2017:

Rates in the secondary market in the last one week have remained slightly stable from previous weeks. Due to current market conditions, rates at the primary auction may close around what we have in the secondary market.
Following the table above, the rates at which Capital Bancorp Plc (CBP) will bid at this auction through a licenced Primary Dealer and Market Maker (PDMM) are as follows:

91 days – 13.00%
182 days – 16.50%
364 days – 17.50%

NOTE: Settlement for this auction will be on Thursday, 20th
Contact your Primary Dealer and Market Makers (PDMMs).

Happy to share this: “The ‘Deity’ and ‘Humanity’ of Christ….. “If we diminish either His deity or his humanity, we damage the gospel”.

Romans 1.3

“Concerning His Son Jesus Christ our Lord, who was born of the seed of David according to the flesh,”

“concerning His Son Jesus Christ our Lord,”

The Scriptures are about Jesus Christ our Lord. They are Christ-centered. The gospel is about the person and work of Jesus. The word “concerning” means around. This is the Greek word peri (around) from where we find part of the English words “perimeter” and “periphery.” The gospel not only concerns Jesus Christ but it surrounds Him. It’s all about Him; He is the very substance of the gospel.

Jesus was both God (Lord) and man. The title “Son” shows the unique relationship between the Father and Christ as the Son. This title places Him within the Trinity. This passage reflects God’s estimate of His Son.

“who was born of the seed of David according to the flesh,”

Christ was not only God but also genuine humanity. This phrase demonstrates the weakness of Jesus’ earthly life. Jesus entered into time and space by human birth. We call this His humiliation. He was born in the lineage of David. He was a true human being. This verse declares the humanity of Christ. He was more than human, as we will see in the next verse.

Jesus was born into the royal family of David. This was affirmation of Jesus as Messiah. The words “was born” come from a term meaning to come into being. The idea is that He became something He was not previously. These words imply prior existence. They imply transition from one state to another. The Son of God became the Son of Man without divesting Himself of His deity. Jesus at His birth came into a new condition—membership in the human race. He was eternal God trillions of years previously ad infinitum, but at His birth He became a human being. John used this term in the important verse 1:14
“14 And the Word became flesh and dwelt among us, and we beheld His glory, the glory as of the only begotten of the Father, full of grace and truth.”

“Of the seed of David” means that Jesus had a legal mother and father. He had a real mother but not a real earthly father. Mary was a descendant of David through Solomon’s younger brother Nathan.

“Flesh” refers to the physical body of Christ. “Seed” refers to the genealogy of Jesus. His genealogy harks back to David in ancestry.

God portrays the gospel by both a Person and His work. This Person from eternity was born of a Jewish family of royal lineage. He was also God almighty. If we diminish either His deity or his humanity, we damage the gospel. We value Jesus’ work by His person. If I were to expound on physics, it would be of little value, for I know very little about physics. Jesus’ credentials as Savior rest on His person.

PRINCIPLE: We should not confuse the deity with the humanity of Christ.

We must be careful not to confuse the humanity with the deity of Christ. We cannot mix the two. They stand as genuinely separate categories. Deity is not humanity nor is humanity deity. However, the same Person exists in both the humanity of Christ and the deity of Christ. Christ is one in person.

The reason Jesus came as man was to die in his body for our sins. He became the true mediator between God and man. As man he represents man and as God he represents God in the mediating process.

1 Tim 2: 5 For there is one God and one Mediator between God and men, the Man Christ Jesus . . .

…. There is a difference between “divinity” and “deity.”…… A wonderful piece from Dylnne!

…”Divinity is that which pertains to God. Deity is the state of being God. We can know divinity by perceiving creation. Those who know special revelation (such as the Bible) can know His deity. Divinity does not specify an attribute but the sum of His invisible attributes.”

Romans 1.20

1.20 “For since the creation of the world His invisible attributes are clearly seen, being understood by the things that are made, even His eternal power and Godhead, so that they are without excuse,”

Verses 19 and 20 explain why God reveals His wrath. God provides sufficient evidence of Himself to hold people accountable to revelation. Verse 20 shows how we can perceive God’s “invisible attributes.”

1.20a “For since the creation of the world His invisible attributes are clearly seen,”

God is a spirit (John 4:24) and that makes His attributes invisible. We can see something of the effects of God’s invisible attributes in creation.

Since God is the Creator, we can see those marks of His work “clearly.” What we can see is the reality of His divine essence in general revelation. “Clearly” leaves no doubt about its reality; there is no equivocation here but rather certainty of knowing. Creation cannot show us His love, but it can clearly show His power and order.

1.20b “being understood by the things that are made [material creation],”

We can understand some of God’s attributes by creation—a source of our knowledge, albeit this understanding is limited because it does not give specific information about the gospel. This general revelation not special revelation.

The word “understood” means perceived or comprehended by the intellect. This understanding is the result of the thinking process.

1.20c “even His eternal power and Godhead,”

Two things we can understand about God are His “eternal power” and His “Godhead.” The word “eternal” occurs only here and in Jude 6. God is everlasting, along with all His attributes. Creation is limited, perishable, and contingent (uncertain). God is not limited, perishable, or contingent.

We can translate “Godhead” as divine nature. This is the only occurrence of the Greek word in the New Testament. His divine nature is what makes up what we call God; this includes His personality. God’s essence is the sum of all His attributes.

There is a difference between “divinity” and “deity.” Divinity is that which pertains to God. Deity is the state of being God. We can know divinity by perceiving creation. Those who know special revelation (such as the Bible) can know His deity. Divinity does not specify an attribute but the sum of His invisible attributes.

Revelation of God in creation is more than a pantheistic “spirit in nature”; it is, rather, God’s divine nature.

1.20d “so that they are without excuse,”

People can see God in creation so clearly that to ignore it is indefensible. They are culpable to the light they see in nature. People have no defense for unwillingness to believe.

The Greek word for “without excuse” suggests legal culpability. No one has a defense against the justice of God. There is no exception to this culpability because it is impossible for anyone to look at creation and not see God’s creative power and attributes manifest in creation. No one can plead ignorance of God. They have no apologetic against God. This is stronger than “without excuse.” The idea is that people have no legal defense to justify rejecting the God of creation. All people of all time are defenseless in their argument for atheism or agnosticism.

PRINCIPLE: All people, not only those who know the Bible, are culpable (blameworthy) before God.


All people have a revelation in nature. For every effect, there must be an adequate cause. We are forced to conclude that the tremendous effect of the universe demands a Creator of eternal power and divine attributes. We can trace God from the world around us; we can see His power and majesty in creation. God is justified to deliver His wrath on those with culpability to revelation.

Ps 19:1 “The heavens declare the glory of God; And the firmament shows His handiwork. 2 Day unto day utters speech, And night unto night reveals knowledge. 3 There is no speech nor language Where their voice is not heard. 4 Their line has gone out through all the earth, And their words to the end of the world. In them He has set a tabernacle for the sun, 5 Which is like a bridegroom coming out of his chamber, And rejoices like a strong man to run its race. 6 Its rising is from one end of heaven, And its circuit to the other end; And there is nothing hidden from its heat.”

Western philosophical reductionism shuts out God, purpose, meaning, and value from the “real” world. There is no defense for this if we look at creation. Every effect must have an adequate cause greater than the effect itself.

Happy to share with you this lesson!

Here is the next lesson in the Book of Romans. Enjoy and God bless! Dlynne

Romans 1.18

1.18 “For the wrath of God is revealed from heaven against all ungodliness and unrighteousness of men, who suppress the truth in unrighteousness, ”

Verse 18 introduces the first major section (of Romans 1:18-32). This passage reviews why God’s judgment fell on human beings and why they are under judgment. God never judges without evenhanded process. Verse 18 presents a summary statement of the following argument.

18a “For”

In verse 17 Paul explained how God’s righteousness was revealed; he went on in verse 18 to explain how God’s wrath is revealed.

18b “the wrath of God”

This wrath of God is a universal indictment (formal charge against), as we shall see in future verses. God does not view sin passively. God’s love does not preclude His wrath. The opposite of love is hate, not wrath.

God’s wrath is not loss of self-control for selfish reasons. He never loses his temper. God’s wrath is His opposition to anything contrary to His nature. His wrath, therefore, has a personal dimension. That is why forgiveness is not cheap from God’s viewpoint; the cost of forgiveness was the cross.

People who see the love of God without a proper emphasis on the wrath of God are out of balance biblically. We should never leave the impression that sin does not matter to God. God is not benign about sin. He does not tolerate it.

18c “is revealed from heaven”

God’s wrath is currently being revealed from heaven. Wrath is a matter of revelation. This wrath comes from the presence of God—“from heaven.”

18d “against all”

God’s wrath is against all sin; it is universal with no exceptions.

18e “ungodliness and unrighteousness of men,”

God directs His wrath against two areas: (1) ungodliness and (2) unrighteousness. He points this wrath not against men per se but against their sin. God hates the sin but loves the sinner.

“Ungodliness” (impiety) is lack of reverence towards God. This is sin against God. This sin disregards God. Ungodliness results in unrighteousness.

“Wickedness” is literally unrighteousness. The effect of sin against God results in acts that are not right with God.

Note God’s wrath is against “all” sin, no exceptions. God does not overlook any violation of His character.

18f “who suppress the truth”

The word “suppress” comes from two words: to hold and down. The truth comes to people but they hold it down from affecting their lives. They do not want anything to do with God’s revelation; they have negative volition (act of will) towards truth.

The “truth” here is general truth in creation. It is not the saving knowledge of Christ and His work. However, God revealed enough of Himself to lay blame against those who have negative volition towards the truth that they know.

18g “in unrighteousness,”

This verse uses “unrighteousness” twice, placing more emphasis on the key words in Romans—“right,” “just,” “righteousness,” “to justify,” and “unrighteousness.” “Unrighteousness” here is set in antithesis (opposition) to “righteousness of God” in verse 17. People are not right with God. Their motivation for rejecting revelation is that they do not want to be right with God. They prefer their own way, not God’s way.

PRINCIPLE: God’s wrath is against those who reject revelation.


The fundamental reason God’s wrath comes against man is that he rejects revelation. The underlying principle is that God wants man to know Him. To reject God’s desire to be known causes His wrath.

God’s wrath does not contradict His goodness but it is a natural consequence of it. If God were not angry at sin, He would not be righteous. It would be impossible for God to love us apart from the work of Jesus on the cross (paying for our sin). This is how God keeps His righteousness intact. God never offers us love without justice. His justice was fulfilled at the cross. The gospel is about more than love.

This verse also answers the question “Why are those that never heard the gospel lost?” Every person who has ever existed has received God’s revelation, even if it is only basic truth about God in creation. If people go positive willfully towards God in the truth that they know, then it is God’s responsibility to take the specific gospel message to them.


The purpose of a pension scheme is to provide the employees of an organization with a means of securing on retirement, a standard of living reasonably consistent with that they enjoyed while in service. In effect, it is the totality of plans, procedures and legal processes of securing and setting aside funds to meet the social obligations of care which employers owe their employees on retirement or in case of death. Thus, Pension Fund Administration is geared towards meeting the objective stated above. A well administered scheme will therefore serve as an incentive to new employees and helps to hold back experienced staff.

In Nigeria, pension scheme can be grouped into contributory and non-contributory. All Pension Scheme up till 30th June 2004 were non-contributory schemes. The Non-contributory schemes dated back to 1951, when a colonial pension’s law designed primarily for UK Officers known as “the Pension Ordinance” was enacted and made retroactive from 1st January, 1946. This Ordinance had limited application for indigenous staff to the extent that it was granted at the pleasure of the Governor-General. It was not an automatic right of Nigerians. It could be withheld at the flimsiest excuse.

As at independence in 1960, the Pension ordinance CAP 147 of 1958 Laws of Nigeria (effective 1/146) as amended by Legal Notices, operated in the public Service up to 31st March 1974. This was drastically reviewed and replaced by Decree 102 of 1979 (new Pension Act CAP 346 of 1990 Laws of Nigeria). This Law has a commencement date of 1st April 1974. The Pensions Decree 102 of 1979 is the basic pension law from which other pension laws in the public service of Nigeria have developed. The other laws which cater for specific professional groups but retain the man ingredients of Decree 102 of 1979 are:
 The Armed forces pensions Act 103 of 1979.
 The Pension rights of Judges Act No 51 of 1988, 29 of 1991 and 62 of 1991.
All the pension schemes run in the public service up to June 30th 2004 were non-contributory in the sense that employees do not contribute from their salaries towards the pension and/or gratuity. The Government simply budgets pension amount as well as that of present workforce. Gradually the financial burden of pension/gratuity became very weighty on government especially when section 1(1) of the 1979 law states that “………. Any pension or gratuity granted hereunder to any person on his retirement from the public service of the Federation shall be computed on the final pay of the person entitled thereto and in accordance with the provisions of schedule 1 to this law”.
Prior to the enactment of this law, Pension calculation was based on “basic pay” and no “total pay”. As more persons joined the rank of pensioners, Governments started finding it difficult to meet pension obligation to pensioners. By 2002, pension liabilities nationwide was estimated at N2 trillion. This problem was further compounded by frequent increases in salaries and pension without a full assessment of the short and long term financial implication of these increases.
To address this problem, the Obasanjo administration passed into law, the Contributory Pension Act of 2004 otherwise known as Pensions Reform Act 2004. The scheme brought out a unifying law for both the public and private sector pension administration, makes contribution towards pension compulsory for both employer and employee and fully funded. The scheme is to apply to all employees in the public sector; all employees in the private sector in which there is, at any point in time, 20 or more employees in the employment of a company, firm or enterprise; and all employees of a company, firm or enterprise having less than 20 employees in its employment with annual turnover of not less than N25,000,000.

The objective of the Pension reform Act 2004 is to ensure
 That every person who worked in either the Public or Private Sector receives his retirement benefits as and when due.
 Assist improvident individuals by ensuring that they save enough to cater for their comfortable livelihood during old age.
 Establish a uniform set of rules and regulations for the administration and payments of retirement benefits for the Public and the private Sector.
The scheme stipulates that as from the commencement of this act, no person shall be entitled to make any withdrawal from his retirement savings account, opened under section 12 of the Act before attaining the age of 50 years. However, if the contributor loses his/her employment due to rationalization and/or redundancy, and having stayed out of employment for minimum of 6 months, he or she is entitled to 25% of the amount standing in his/her Retirement Saving Account (RSA).
Three possible Benefits:
 Programmed monthly or quarterly withdrawals calculated on the basis of an expected life span: or
 Annuity for life purchased from a life insurance company licensed by the National Insurance Commission with monthly or quarterly payments; and
 A lump sum from the balance standing to the credit of his retirement saving account – provided that the amount left after that lump sum withdrawal shall be sufficient to procure an annuity or fund programmed withdrawals that will produce an amount not less than 50 percent of his annual remuneration as at the date of his retirement.
This brings us to the main discourse – Programmed withdrawal or Life Annuity. There has been argument on which is better; the Programmed withdrawal or Life annuity. Of recent, the Head of LASCO Life Assurance Limited, Annuity Unit; Mrs. Fawatade Toyin appealed to retirees and pensioners in the country to embrace Life Annuity as their retirement income option. On the other hand, it is believed that Programmed Withdrawal is better. According to the Deputy General Manager (Technical and Support Services, AIICO Pension Managers Limited; Mr. Patrick Onos, majority of pension contributors might have been opting for programmed withdrawal instead of life annuity when they want to retire because they are convinced that they can continue to trust the Pension Fund Administrator (PFA), since the PFAs have been managing their pension contributions for certain number of years and so more comfortable allowing them to continue managing their money at retirement. Howbeit to above, let us compare and contrast the two schemes,
A Life Annuity is a financial contract in the form of an insurance product according to which a seller (issuer, typically a life insurance company makes a series of future payments to a buyer (annuitant) in exchange for the immediate payment of lump sum (single-payment annuity) or a series of regular payments (regular-payment annuity), prior to the onset of the annuity. It is a product offered by Life Insurance companies regulated by the National Insurance Commission (NAICOM). It pays pension for life with a minimum guarantee period of 10 years.
On the other hand, Programmed Withdrawal is a product of Pension Fund Administrator (PFA). It is the withdrawal of funds on a regular basis, which may be monthly, quarterly, etc. It pays pension over an expected life span. Retirement Saving Account may be exhausted during life time.
A retiree on Programmed Withdrawal can change to annuity with an Insurance company and can as well move to another PFA, unlike the Life Annuity where the retiree cannot move to Programmed Withdrawal.
Under Programmed Withdrawal, if a retiree dies within the guaranteed payment period of 10 years, the RSA balance shall be paid as lump sum to the estate of the retiree or named beneficiary as inheritance, but with Life Annuity, monthly annuities will be paid up to 10 years to beneficiaries because annuity is guaranteed for minimum of 10 years. However, if the retiree is using Programmed Withdrawal and dies after 10 years of retirement, RSA balance shall be paid to the beneficiaries of the deceased as inheritance, but if the retiree is using Life Annuity, no inheritance will be pad to the beneficiaries.
Under Life Annuity, monthly payments commence once the insurance company receives the premium unlike the Programmed withdrawal, where monthly payments commence from the date of retirement that is pension arrears (if any) are paid to the retiree.
With regard to longevity risk, the RSA balance may be exhausted during life time where the retiree chooses Programmed Withdrawal, but under Life Annuity, the longevity risk is passed to insurance company who pays the pension for life. – Idika Agwu Aja


Some believe that a firm’s decision to pay dividend is subject to the weighted average of current earnings and past earnings. Thus, according to Lintner’s (1956) simple model, payment of dividend depends in part on the firm’s current earnings and in part on the dividend of the previous year, which in turn depend on that year’s previous earnings and the dividend in the year before, consequently, dividend payment depends on the weighted average of current earnings and past earnings. As such, mature companies with stable earnings; pay high proportion of earnings, while growth companies have low payout (if they pay dividends at all).
Also decision to pay dividend or not is often mixed up with either financing or investment decisions. Some firms pay low dividends or do not pay at all, because management is optimistic about the firm’s future and wishes to retain earnings for expansion. In this case the dividend is a by-product of the firm’s capital budgeting decision. Another firm might finance capital expenditures largely by borrowing, this releases cash for dividends. In this case the firm’s dividend is a by-product of the borrowing decision.
Albeit to above, different opinions have been theorized on whether or not dividend payment or not, increase or decrease affects stock price and firm’s value?
On the right, known as the conservative, believes that increase in dividend, increases stock price or firm’s value. They point out that there is a natural clientele for high-payout stock. For example some financial institutions are legally restricted from holding stocks lacking established records. Trust and Endowment funds may prefer high-dividend stocks because dividend are regarded as spendable “income” whereas capital gains are “additional principal”
On the left, known as radical group believes that increase in dividend payment reduces firm value. They argue that when dividend is taxed more than capital gains, firms should pay the lowest cash-dividend they can get away with. So, available cash should be retained for future profitable investment or used to repurchase shares. If dividend attracts more tax than capital gains, why should any firm pay dividend? If cash can be distributed to stock holders, then share repurchase is always the best channel for doing so? So the leftist called for not only for low payout but for zero payment especially when tax on dividend is heavily higher than tax on capital gains. However, it is important to note that the distinction between dividend and capital gains is less important for financial institutions. Many of which operate free of all taxes and therefore have no reason to prefer capital gains to dividend or vice versa. For example, pension funds are untaxed. Only corporations have a tax reason to prefer dividends. They pay corporate income tax on only 30% of any dividend received. Thus the effective tax rate on dividend received by large corporations is 30% or 35% (the marginal rate) or 10.5%. But they have to pay a 35% tax on the full amount of any realized capital gain.
At the centre, known as Middle-of-the-Roaders represented by Miller, Black and Scholes maintained that a company’s value is not affected by its dividend policy. They published a theoretical paper showing the irrelevance of dividend payment where there is a perfect market of no taxes, transaction costs or other market imperfections. They equally recognize the possible high payout clientele group, but argue that they are satisfied also. On the argument on higher payout being discouraged by high taxes, the middle-of-the-roaders are of the view that there are plenty of wrinkles in the tax system which the stockholder can use to avoid payment of taxes on dividend. For example instead of investing directly in common stocks, they can do so through pension fund or insurance company which receives more favorable tax treatment. So company that pay low dividend will be more attracted by highly taxed individuals, while those that pay high dividend will have greater proportion of pension funds or other tax-exempt institutions as their stockholders. They argued that investors may not need dividend to get their hands on cash and as such will not be willing to pay higher prices for the shares of firms with high payouts. Therefore firms might not worry about dividend policy, but let dividends fluctuate as a by-product of their investment and financing decisions. Any increase in cash dividend must be offset by a stock issue, if the firm’s investment and borrowing policies are held constant. In effect the stockholders finance the extra dividend by selling off part of their ownership of the firm. Consequently, the stock price falls by just enough to offset the extra dividend. Also as expected switching from cash dividend to share repurchase has an effect on shareholder’s wealth. When shares are repurchased, the transfer of value is in favor of those who do not sell.
However, market consensus on expected dividend payment based on earnings can affect the stock value. For instance, in 2017, Total Nigeria Plc recommended a final dividend of N17 per share for the year ended December 31, 2016 to be paid from PAT of N14.769 recorded in the year, a 265.5% increase from N4.1 billion recorded in 2015 to N14.769 billion recorded in 2016. Based on the result, the market reacted negatively as the shares fell by 5.4 per cent to close lower at N274.55 each.
Analysts believe that the final dividend recommended by Total Nigeria was below market consensus given the strong earnings growth recorded. This works out to a dividend payout of just 39 per cent, the lowest in over two decades.
What then is the impact of payment or non-payment of dividend on the value of the stock and the wealth of a company? When you buy stock, there are two income streams expected – dividend and capital gain and the value of the stock is the present value of the dividend and stock price discounted at appropriate discount rate. You can use Gordon growth model, two-stage or three-stage dividend discount model to value the stock, but what is important is what you want to achieve; to detect if the stock is under or over-valued and why. For instance, Gordon growth model, which depends on three key factors, future dividend, cost of equity and expected growth rate is best suited for firms growing at a rate comparable to or lower than the nominal growth in the economy and which have well established dividend payout policies that they intend to continue into the future. The dividend payout of the firm has to be consistent with the assumption of stability, since stable firms generally pay substantial dividends. In effect, the model, underestimates the value of stock in firms that consistently pay out less than they can afford and accumulate cash in the process.

Idika Agwu Aja