The hunt for yield intensifies. The money market is pricing in at least one US interest rate cut later this month – the first this decade – with more to follow. 10-year US benchmark yields have fallen by over 50bps in the past three months, and over US$13trn bonds globally are generating negative yields. Our fixed income research colleagues have already highlighted high-yielding bonds from Ghana, Petropavlovsk, DTEK and CSN, and in this report we showcase five banks within our 82-stock banks universe most likely to provide investors with sustainably high dividend yields.
Our top yield picks: UBA (18.0% 2019f DY), Zenith (16.2%), CRDB (13.2%), GTB (10.3%), Muscat (7.4%).
Source: Tellimer Research. Size of bubble represents dividend yield.
Key 2019f selection criteria (see also Table 2 and Figures 1-4)
- Dividend yield: For our coverage universe this comes in at a median 4.5%. Our five yield picks have a median 13.2% yield.
- Yield versus local benchmark: Our coverage universe typically generates a dividend yield 5.1 percentage points below the local long-term (c10-year) sovereign yield. However, c11% of our coverage generate a higher dividend yield than the sovereign bond. For our shortlisted companies, they generate a median 1.4 percentage point yield premium to the benchmark.
- Dividend payout ratio: This stands at 31% for our global coverage median, but a 45% median for our shortlist.
- Capital adequacy ratio: This comes in at a median 17.0% for our global coverage, and 22.2% for our shortlist