South African banks have been a favourite among South African stock pickers in recent months because they perform well when high inflation and interest rate hikes occur.
In this article, we take a look at two large banks, Nedbank and Standard Bank, which had particularly strong year-to-date (YTD) performances.
Nedbank’s share price grew by 23% in 2022, while Standard Bank’s share price increased by 20%, as shown in the charts below.
Nedbank and Standard Bank are strong dividend payers with respective dividend yields of 5.42% and 5.1%.
Daily Investor performed an analysis of their dividends to determine their ability to pay dividends consistently.
Nedbank has consistently increased its dividend payment per share from 2011 to 2019, with an average annual dividend increase of 14%.
Since then, Nedbanks’ dividend payment has taken severe strain, with a 52% decrease in 2020 and a 38% decrease in 2021.
Nedbank’s average dividend payout ratio from 2011 to 2019 was 49%, indicating that 49% of its earnings were paid out as dividends.
The latest dividend payment, which was significantly less than pre-pandemic levels, only had a payout ratio of 19%.
This indicates that Nedbank has the ability to increase its dividend payments if it returns to its average historical payout ratio level.
Standard Bank also consistently increased its dividend payments per share from 2014 to 2019, with an average annual dividend per share increase of 13%.
From 2020, its dividend payouts decreased by 46% but recovered a but with an 11.1% increase in 2020.
From 2014 to 2019, Standard Bank had an average payout ratio of 52%, while its latest payout ratio was 39%.
The last word
The financial industry had a good performance this year, and Nedbank and Standard Bank are no exceptions.
These two banks are strong dividend payers with very attractive dividend yields. They were able to grow their dividends at impressive rates and have healthy and sustainable payout ratios.
Nedbank outperformed Standard Bank in dividend payments by growing its historical dividends at a higher rate and for a longer period. It also maintained a lower average payout ratio.
Although its latest annual dividends were still low, it has the ability to increase these dividends given the low current payout ratio.
Nedbank recently announced an 81% increase in its 2022 interim dividend of 783c per share from 433c per share in 2021.