The National Investment Trust (NIT) is likely to pay a dividend ranging from 27.5 percent to 32.5 percent for the current fiscal year as over 30 percent of its portfolio is in fuel and energy sector. Due to efficient portfolio management coupled with the fact that over 30 percent of NIT's Rs 62 billion portfolio is in fuel and energy sector, the performance of NIT remained excellent in this financial year also. To date in FY05, NIT unit price rose by 34 percent.
During the first nine months of FY05, NIT posted EPS (or earnings per unit) of Rs 2.93 far better than last full year EPS of Rs 2.28.
Analysts at brokerage houses expect decent performance by NIT in 4QFY05 thus enabling them to announce a record payout this year. During last two years, NIT paid more than 90 percent of its earning to its unit-holders. In 2003, NIT EPS was Rs 1.87 and its payout was Rs 1.75 per unit.
Similarly, NIT paid Rs 2.55 per unit against the EPS of 2.63 in 2004. The earning of NIT consists of realised gains and the dividend income on its investment. According to JS Research, a cash dividend of Rs 2.75-3.25 is likely for FY06. The announcement is expected to be made by beginning of July.
Moreover, NIT will continue to benefit in terms of cash flows due to privatisation of state-owned units being held by NIT. NRL's sell-off alone will generate Rs 9.6 billion cash for it besides, enhancing its NAV as the market price of NRL is far lower than the actual price (of Rs 483 per share) that NIT will realise on its 20 million holding.
Companies that will benefit NBP, BoP, Faysal Bank, Pakistan Reinsurance, etc are amongst the big unit-holders. These four companies hold approximately more than 44 percent of NIT units.
The dividend payment exercised by the open-ended fund of NIT is an important event for the major unit-holders viz. National Bank (NBP), Bank of Punjab (BoP), and Faysal Bank (FABL), as the dividend significantly contributes to the respective banks' sound earning base.
As per the last reported accounts of NIT, NBP's holding of 368 million units is to the extent of 25 percent of the total NIT unit holdings whereas BoP's 151 million units and FABL's 157 million units are nearly 10 percent each of the total unit holdings.
Last year, the fund paid a dividend of Rs 2.55 per unit wherein for the current fiscal if NIT announce a dividend of Rs 3.25 per unit. As per analysis, NIT is expected to post an after-tax profit of Rs 15.6 billion in FY05.
However, for the calculation of per unit income, analysts have set aside expected unrealised gains and also assumed a 90 percent payout to avoid the incidence of tax. Our unit earnings arrive at Rs 3.22/units. For arguments sake, if we assume a figure of Rs 3.25/unit as a dividend payout from the fund, then this phenomenon would transcend an addition in the prospective FY05 earnings of NBP, BoP & FABL by Re 0.44, Re 0.71 and Re 0.39, respectively.
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