On February 11 and just out of the blues, Safaricom surprised the Nairobi Securities Exchange (NSE) declaring a surprise 45 cents dividend pay-out per share for a whooping Sh18 billion.
This was the stock’s first interim dividend and its declaration shocked the market emerging against what has been a torrid last 12 months for not just companies but also the Kenyan economy.
What followed in hours after the announcement was uptick in demand for the stock with Safaricom’s share price ending the day’s trading at historic record of Sh37.80.
Interests on NSE counters in recent months has not been mainly based on material disclosures but a calculated move by investors to tie themselves up to profits emanating from probable dividends.
In a year which saw the bulk of listed companies hit by COVID-19 related turbulence, investors are keen attaching to the few firms declaring rare investor payments.
Last year, the majority of companies traditionally declaring dividend pulled back on the investor pay-outs as they adopted cash-preservation stances to weather the storm from the pandemic.
Among businesses that have pulled or tweaked dividends last year include Equity Group, NCBA Bank and Standard Chartered Bank.
After a barren 2020 run, which saw the NSE remain in bear territory, investors keen on taking profits from the few opportunities presented by what is the former full-blown dividend season.
As corporates begin making financial disclosures for the past year on March 1, investors will be rubbing their hands with glee ready to take up positions in dividend-declaring stocks ahead of book closures by the listed companies.
Already, Safaricom’s stock rally has demonstrated the investors’ high affinity for profit.
Besides Safaricom, electricity generating firm, KenGen, and cigarette manufacturer, BAT, have seen their stock prices soar on the back of dividend declarations.
After tremendous earnings last week which saw a final Sh41.50 dividend declaration, BAT led the week’s surge in large cap stocks, gaining nearly 8.9 per cent in share price by close of business on February 19.
Investors can, however, only make a guess on the companies set to make the final dividend declaration with the cash preservation stance set to stick.
Nevertheless, the firms tipped to make a final dividend pay-out include Safaricom (again) and the Co-operative Bank while KenGen is almost guaranteed to make a further shareholder pay-out when it declares its financials later on in the year.
On the contrary, for investors keen on long-term value rather than dividends, the market depressed price-to-earnings ratio of 11.8 times or an equivalent 8.4 per cent below the 11-year average of 12.9 times presents pockets of values to participants willing to wait out the effects of the pandemic on the equities market.
The only direction for the NSE, however, appears to be up with the Kenyan market having faced the worst across the last 10 months since the country reported its first COVID-19 case in mid-March 2020.
The NSE’s year-to-date performance (YTD) has seen all three indexes rise with the Nairobi All Share Index (NASI) gaining by 8.9 per cent ahead of the NSE 25 index at 6.7 per cent and the NSE 20 with gains of 0.9 per cent.
Foreign investors have also begun crossing back to the NSE with their year-to-date activity represented into net buys of Sh11 million ($100,000) in just over one-and-a-half months.