ZSE not the best investment market right now

which are falling to lowest levels due to serious liquidity challenges and other determining factors.
Prices are likely to remain low as long as liquidity is still a challenge.

Big capitalised counters, which should be driving the market, are trading in the negative despite huge fundamental potential.
Punters have taken advantage to buy cheaper stocks but the market is taking too long to pick-up as foreign investors withdraw their funds from what they refer to as risk markets.
Our market is also lacking speculators who can push prices up in the shortest possible time.
Given this scenario, investors are no longer investing in equities so that they sell their shares at a premium when the price appreciates in value but for a dividend.

Following the introduction of the multiple currency system (in 2009) that has brought about economic growth has resulted in companies growing shareholder value.
Despite low stock prices on the market some companies have remained profitable and they are declaring dividends to its shareholders.
This heralds the shift from share premiums to dividends and this instills confidence in the market and despite low stock prices shareholders are being rewarded.

Even the small-capitalised companies have joined the bandwagon to reward shareholders through declaring dividends.
Most of the stocks on the Zimbabwe Stock Exchange are undervalued and will take a bit longer for the market to do self-correction.
However, the idea of dividends is good when the company is producing and not doing well in terms of price on the stock exchange.

Since the introduction of the multiple currency system, a number of companies have declared dividends and the cover was good judging from the current operation environment, where capacity utilisation is at about 60 percent.
Mobile phone operator Econet, CBZ Holdings, Zimplow, Innscor, Colcom and Seed Co are some of the companies, which have declared dividends in the multiple currency regime. Econet was the first to declare a dividend in 2009.

The local bourse has got 78 listed counters and just less than 10 have declared dividends, this is an indication that companies are still struggling and failing to reward shareholders.
Given the liquidity crisis companies are opting to conserve cash for working capital rather than declaring a dividend.
It is often argued that companies should reward shareholders and stop deferring dividends.

This week, Tractive Power Holdings Limited published its financial results for the full year to August 31, 2011 achieving a lower than expected earnings per share of US0,73c down from an annualised earnings per share of US1,76c in the first half.

Margins at 4,6 percent are still low.
The company declared a dividend of US0,1c per share representing a 7,3 times cover. Dividend yield is 0,83 percent with a low earnings yield of 6,1 percent and a return on equity of 10 percent.
Tractive had negative cash from operations of US$378 000, which was normalised by an increase in borrowings of US$2 million resulting in a debt to equity ratio of now 17 percent.

Group revenues grew 42 percent to US$36,8 million as earthmoving and material handling equipment unit sales at Barzem grew by 139 percent whilst sales of tractors and generators at Farmec and Northmec increased 149 percent.
Sales at Puzey & Payne rose 45 percent.

During the period under review the group secured franchise representation for Toyota vehicles, the operation trading as Toyota Msasa has enhanced product offering at Puzey & Payne.
Group operating profit was 3 times the prior year comparative of US$619 000. The group added that the biggest portion of this profit came from a strong performance at Barzem.
Group profit before tax of US$2,3 million was 6,4 times last year’s competitive. Due to a tax credit in the prior year, profit after tax was 2,9 times the prior year figure.
In the outlook, the company is expected improve on margins as the mining and agriculture sectors are expected to register positive growth.