Investors dividend payouts render relief in the pandemic year

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Firms recommenced dividend payment to shareholders despite the challenging 2020 that was characterized by cash conservation to survive the coronavirus pandemic.

The Covid-19 pandemic hurt the financial performance of many companies. Some forecasted weaker earnings and therefore suspended cash distributions. This decision was meant to guarantee ample liquidity in the scenario that the pandemic persists.

With a vaccine being foreseen, many companies are evaluating those plans and are paying shareholders with even higher returns than in 2019.

The dividend payments in a difficult year will help shareholders manage after the hit that the economy took due to the Covid-19 pandemic.

In addition to the damaged economy, the pandemic resulted either in employee redundancies and salary cuts which negatively affected the savings of the affected people.

The government of Kenya will be amongst the hugest gainers since it owns shares in some of the firms.

Upon the announcement of Safaricom’s Sh0.45 per share dividend payout, investors scrambled for its shares. This led to propelling the value of the shares to Sh38.50 and the paper value to Sh1.5 trillion.

Since Safaricom does not normally pay interim dividends, its dividend announcement took the market by surprise.

“The surprise dividend announcement at Safaricom and we have seen East African Breweries Limited rally over the past two weeks that has sort of lifted the market. I think the market is picking up success stories and running with it,” said Eric Musau, head of research at Standard Investment Bank.

The firm’s dividend payout policy usually is 80 percent of its full-year net income except in 2016 and 2019.

The National Treasury will bank Sh6.3 billion gross payouts for its 35 percent stake while Vodacom Group Limited and Vodafone Group Plc will divide the Sh7.2 billion for the joint 40 percent interest.

The remaining Sh4.5 billion will be split between the retail and institutional shareholders, this activated a dash for the shares.

Kengen announced that it will pay its shareholders sh1.9 billion after net profit, a 133 percent shoot from Sh18.3 billion for the year ending June 2020.

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About Author

Anthony Kiratu is the Founder of Finsolutions. He is a financial analyst with over 5 years experience in research, investment advisory, valuation and financial modelling. Anthony is a member of the Institute of Certified Investment and Financial Analysts and Institute of Certified Public Accountants of Kenya. He is passionate about development of African Capital Markets through training of investors and dissemination of information for sound financial and investment decision making process. He is also a part-time lecturer in the Certified Investment and Financial Analyst course in the subjects of International Finance, Portfolio Management, Equity Investment Analysis, and Fixed Income Securities. Email: anthony@finsolutions.co.ke Contact: +254 780216631

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