- The record payout was hugely supported by Safaricom
- and banks’ dividends, which helped ease the blow to shareholders who have lost tens of billions in share price erosion at the Nairobi bourse.
- The giant telco and the lenders account for than 75 percent of the market value of NSE, which has shed Sh395.97 billion since the start of the year as foreign investors withdrew amid turmoil in global markets in the wake of the pandemic.
- Restrictions imposed to curb the spread of the virus like nationwide dusk-to-dawn curfew and ban on public gatherings has hit consumer spending, and subsequently company sales and profits.
Summary
Listed blue chip firms that make the Nairobi Securities Exchange
20-Share Index have shrugged off a tough business environment and
economic uncertainty due to the coronavirus pandemic to pay shareholders
more than Sh102.9 billion in dividends
Their latest
payouts represent an increase of 8.6 percent on the Sh94.8 billion the
companies paid in 2018, signalling that their boards and managements are
confident they have adequate cash to navigate the crisis.
The
record payout was hugely supported by Safaricom and banks’ dividends,
which helped ease the blow to shareholders who have lost tens of
billions in share price erosion at the Nairobi bourse.
The
giant telco and the lenders account for than 75 percent of the market
value of NSE, which has shed Sh395.97 billion since the start of the
year as foreign investors withdrew amid turmoil in global markets in the
wake of the pandemic.
Restrictions imposed to curb the
spread of the virus like nationwide dusk-to-dawn curfew and ban on
public gatherings has hit consumer spending, and subsequently company
sales and profits.
It was expected that companies would cut or cancel dividends in
the race to preserve cash during the coronavirus crisis, which hit Kenya
in mid-March when firms prepared to announce their financial reports
and declare dividends.
Kenya has 465 confirmed cases of
coronavirus and 24 deaths with effects of the infectious disease
leading to forecasts that the economy could contract one percent in the
worst case scenario.
A few companies that are part of the benchmark NSE index such as NCBA Group
and Nation Media Group
offered bonus shares and suspended cash distributions to shareholders, citing the need to preserve money.
Those
leading in cash distributions are traditionally the most profitable
companies, able to make the payouts and still add to their
multi-billion-shilling cash reserves built over the years.
This
has put them in a pole position to weather shocks, especially the
economic fallout triggered by the spread of the coronavirus.
Others
see the raising of dividends as the optimal use of cash in an
environment where making big investments are not likely to yield
adequate returns in the short term.
A few firms like
Safaricom, on the other hand, are expected to go through the Covid-19
pandemic little scathed and may even benefit from increased demand for
their services.
The telco declared a dividend of Sh1.4
per share or a total of Sh56 billion for the year ended March, a move
that will see it retain Sh18.7 billion out of its Sh74.7 billion net
earnings.
The company’s total payout in the previous
year stood at Sh74.9 billion and consisted of a normal distribution of
Sh1.25 per share (Sh50 billion in aggregate) and a special one of Sh0.62
per share (Sh24.8 billion).
“Whilst things will remain
challenging in the short term, we believe we are well placed to weather
this storm,” Safaricom said in a statement.
KCB Group
declared a final dividend of Sh2.5 per share, pushing its total payout
for the year ended December to Sh3.5 per share or a total of Sh11.2
billion.
The country’s biggest bank made the announcement before Kenya recorded its first Covid-19 case on March 12.
Banks
are expected to register increased loans defaults on reduced corporate
sales as job layoffs and pay cuts make it difficult for workers who had
tapped credit on the strength of their payslips.
This will raise banks costs associated ‘with bad loans and potentially cut the lenders’ interest income.
Loans
worth Sh81.7 billion have been restructured since late March, mainly in
tourism, restaurants and hotels, real estate and trade.
BAT
, Kenya Re and NSE are firms that form part of the benchmark index that have marginally cut dividends.
The
dividends are key to putting money in the pockets of shareholders who
require cash to meet personal expenses that ultimately boost demand in
an economy where consumption has slackened.
Other
listed banks, including Equity and Co-op, announced they would maintain
or enhance their dividends during the period coronavirus started
spreading in the country, indicating they are confident of riding out
the crisis.
Equity raised its dividend from Sh2 a share
to Sh2.5 or a total of Sh9.4 billion. Co-op Bank demonstrated its
confidence by bringing forward its Sh1 per share or Sh5.8 billion
dividend, which was paid on April 23.
In a surprise
move, NCBA Group cancelled its earlier dividend declaration of Sh1.5 per
share (Sh2.2 billion) and replaced it with a bonus share of one for
every 10 held. The bank said it had changed its mind after taking stock
of the potential impact of the pandemic on its business.
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