Higher cash dividends from cheap stock valuations on the Muscat Securities Market (MSM) could lure investors and boost activity on the bourse, according to analysts and brokers, who add that higher yields for investors offers opportunities to reposition their portfolios on reliable dividend-paying stocks.
Until February 23, as many as 40 companies on MSM announced cash dividends ranging from 7.5 percent to 117 percent of paid up capital, putting extra cash in investors' pockets from March onwards this year.
Hamad al Hatmi, head of brokerage, Al Madina Financial and Investment Services, said that returning cash to the shareholders seems to be the key focus of leading companies on MSM this year. He said, This year most of the companies are announcing higher cash dividends rather than bonus shares and investors also prefer cash over bonus shares in most of the sectors. The yield environment is quite good due to cheap valuations of stocks that will attract more investors to the market in March and April. Hatmi added that activity on the MSM has already started improving as the investors are repositioning portfolios towards the reliable dividend-paying stocks like Omantel, BankMuscat and Al Maha Petroleum Products.
Among the top dividends payers this year are Shell Oman Marketing with 117 percent, Omantel with 100 percent, Al Maha Petroleum Products with 85 percent, Oman Oil Marketing with 62 percent and Muscat Gases with 60 percent. Lo'ai Badie Bataineh, head of investment management group at Oman Arab Bank, said that the dividend yields are higher than expected, but concerns remain in certain sectors of the market. He said, The services and banking sectors are going to be quite attractive in terms of dividend yield. But we are concerned about the industrial sector and the picture is not clear about performance of industrial sector firms in Oman.
Bataineh added that the cost of funds are going down, with companies preferring to pay cash rather than bonus shares as a result. He added, It will attract more investors, especially institutions who are willing grab dividend cash. However, the volumes and liquidity are concerns in Oman but we expect they are likely to be doubled in the next two weeks as we get closer to the dividend distributions.
The average dividend yield on MSM 30 companies are currently around five percent, which is significantly higher than last year's average yield. Hunaina Banatwala, senior manager for institutional sales at Gulf Baader Capital Markets (GBCM) expects that a part of dividend money will be reinvested in the market and boost trading activity during the second quarter of this year. There is a trend being seen that people are picking up high dividend stocks with good growth potential.
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