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Can GCB Bank achieve a super-safe dividend stock status?

GCB Bank has carved a reputation for consistently paying dividend to shareholders since Doobia.com started tracking dividend data in 2007. The recent declaration of a dividend in respect of the 2020 financial year means that the bank has paid divided for 14 consecutive years, even during the banking sector recapitalisation and coronavirus periods when several competitors failed to pay dividends. GCB Bank has proved to be a safe dividend stock, and as such it deserves the attention of dividend loving investors even if its dividend yield is not as high as some competitors. After all, of what good is a high dividend yield if the company is not consistently paying dividend?

GCB Bank has declared a dividend of GHS0.25 per share in respect of the 2020 financial year, representing 25.0%y/y rise in dividend compared to the previous year. We believe that this was driven by the bank’s ability to weather the pandemic to post modest earnings growth of 4.0%y/y to GHS445.39 million in FY2020.

The market valuation of GCB Bank has improved by 17.3% so far in 2021 to GHS4.75 per share. We have used the prevailing market valuation to compute a current dividend yield of about 5.3%, which should boost the overall contribution of GCB Bank to portfolio returns in 2021.

We expect the bank to pay a total dividend of about GHS66.25 million to shareholders on June 18, 2021. This reflects a relatively higher payout ratio of nearly 15% in 2020 compared to 12.4% in 2019. However, this is below the average payout ratio of nearly 19% in the last five years and 31.7% in the last decade.  While GCB has consistently paid dividends, there is still a significant room for recovery in the dividend payout ratio to historical levels.

Although we consider GCB bank a safe dividend stock, we do not consider it a super-safe dividend stock at the moment. The bank has cut its dividend payout ratio six times in the last fourteen years, and this has resulted in lower dividend in some years. GCB Bank must ensure stability and steady improvement in its dividend payout ratio in order to achieve a super-safe dividend stock status. This would enable investors to better estimate future dividend payments.

See the announcement from the company below.

Final Dividend

GCB announces that the Company’s Directors will be recommending to the shareholders at the upcoming Annual General Meeting, the payment of a final dividend of GHS0.25 per share for the 2020 financial year.

Qualifying date

All shareholders registered in the books of GCB at the close of business on Friday, May 21, 2021 will qualify for the final dividend.

Closure of Register

The Register of shareholders will be closed from Monday, 24th May, 2021 to Friday, May 28, 2021 (both date inclusive).

Ex-Dividend Date

In view of the foregoing, the ex-dividend date has been set as Wednesday, 19th May, 2021. Consequently, an investor purchasing GCB shares before this date will be entitled to the final dividend. However, an investor buying GCB shares on or after Wednesday, 19th May, 2021 will not be entitled to the final dividend.

Dividend Payment Date

The final dividend will be paid on Friday, June 18, 2021.


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