UBA vs Zenith: Which Is Better for Dividends?
For many investors in Nigeria and beyond, banking stocks are not just about capital appreciation they are primarily about dividends. In an economy where inflation remains elevated, interest rates fluctuate, and currency risk is real, dividend-paying stocks have become an important tool for preserving value and generating consistent income. Among Nigerian banks, two names dominate dividend conversations year after year: United Bank for Africa (UBA) PLC and Zenith Bank PLC.
Both institutions are Tier-1 banks with strong balance sheets, international operations, and long histories of rewarding shareholders. Yet, despite their similarities, they approach dividend payments differently. UBA is often associated with high dividend yields and aggressive shareholder rewards, while Zenith Bank is widely regarded as a model of consistency, earnings strength, and disciplined payouts. This contrast has raised a recurring question among investors, analysts, and retail shareholders: which of these two banks is actually better for dividend investing?
A meaningful comparison must examine dividend yield, payout ratios, earnings sustainability, historical consistency, and the broader economic and regulatory environment in which both banks operate. High dividends can be attractive, but without strong profits and prudent capital management, they may not be sustainable. On the other hand, conservative dividends backed by solid earnings may offer better long-term reliability, even if the immediate yield appears lower.
Dividend investing is fundamentally about rewards relative to risk. The key metrics investors examine are:
- Dividend per share (DPS) — how much cash is paid per share.
- Dividend yield — DPS expressed as a percentage of the share price.
- Payout ratio — what percentage of earnings is distributed as dividends.
Dividend consistency and growth — whether payouts are sustainable and rising over time.
UBA Dividend Profile
UBA declared a total dividend of N5.00 per share for 2024 — comprising ₦2 interim and ₦3 final.
This translated to a very attractive dividend yield, leading Nigerian companies at around 13.6% based on then share prices.
Over recent years the bank has increased dividends, reflecting stronger earnings — with total dividend per share rising from N2.80 previously to N5.00.
UBA also has historically shown higher payout ratios relative to some peers, meaning a larger portion of profit is returned to shareholders.
Zenith Bank Dividend Profile
Zenith Bank declared a total dividend of N5.00 per share for 2024 — N1 interim plus ₦4 final.
This equated to a dividend yield of about 10.4% for the same period based on market prices.
The bank also announced robust interim payouts in 2025 — N1.25 per share totalling around N51.3bn — showing resilience even in tough macro conditions.
Zenith’s dividend policy historically has favored steady and predictable distribution, underpinning confidence among long-term holders.
Why Dividend Yield Matters
Dividend yield is often the first metric investors look at: it tells you how much income you earn relative to what you paid for the stock. At 13.6%, UBA’s yield stands out — particularly when compared to general fixed income products like Nigerian treasury bills or corporate bonds.
But investors must also ask:
- Is the high yield sustainable?
- Are dividends backed by strong earnings?
- Could the company reduce the payout if earnings falter?
A high yield driven by a declining share price can be a red flag. If the price plunges because of weak business performance, the yield might look attractive on paper but not be reliable going forward.
Payout Ratios and Sustainability
Payout ratio tells us how much of the bank’s profit is paid out in dividends.
UBA’s 26.6% payout ratio for 2024 means only about one-quarter of its profits were distributed — suggesting room to maintain or increase payouts without jeopardizing capital if earnings stay solid.
Zenith’s payout ratio was lower (around the mid-teens), indicating a cautious but stable approach that retains more earnings for growth, asset quality, and buffers during downturns.
A lower payout ratio is not inherently bad — it can signal that the bank is reinvesting earnings for future growth or shoring up its balance sheet.
Track Record and Growth
Across the past five years, both banks have shown commitment to rewarding shareholders with dividends. However, Zenith Bank has historically paid out more in total dividend amounts compared to UBA due to its larger profit base. Zenith led in total payouts at about ₦505bn, while UBA was at roughly ₦219bn during the same period.
This tells us that:
- Zenith’s scale and profitability have supported larger aggregate dividend distributions.
- UBA’s dividend per share growth rate has been impressive — an indicator of improving shareholder returns over time.Risk Factors for Dividend Investors
Dividend investors should not focus solely on past payouts. Key risk factors include:
- Economic Cycles: Both banks operate in Nigeria and across Africa, meaning earnings and dividends are tied to macroeconomic conditions. Recessionary pressures or regulatory shifts can affect profitability and payouts.
- Credit Quality: A deterioration in loan portfolios forces banks to increase provisions, reducing distributable profit.
- Share Price Volatility: Dividend yield fluctuates with share price. A rising share price reduces yield (if dividend stays flat), while a falling share price may artificially inflate yield.
- Regulatory Requirements: Central Bank of Nigeria prudential guidelines on capital adequacy can influence banks’ willingness to distribute large dividends.
Which Is Better for Dividend Investors?
If you prioritize income yield right now: UBA generally offers higher dividend yields and a trend of increasing payouts. This can be especially compelling for income investors or those relying on dividends as cash flow.
If you want stability with scale and consistency: Zenith Bank’s track record of consistent dividends, larger total payout amounts over time, and proven resilience may appeal more to long-term, lower-volatility investors.
Read Also: Beginners Guide to Nigeria Banking Stocks (NGX)
UBA — Best for those wanting higher immediate yield and dividend growth.
Zenith Bank — Best for investors seeking dividend stability backed by strong earnings and conservative payout policies.
For Nigerian investors and global income-focused portfolios, understanding these nuances is key. Dividend investing is not just about chasing the biggest percentage it’s about sustainability, earnings quality, and alignment with your investment horizon.
Before making any investment decisions, always complement dividend metrics with broader financial analysis, consider your risk tolerance, and consult with a certified financial advisor.
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