NSE fall lifts dividend yields ahead of earnings season

 

Nairobi Securities Exchange (NSE) on the trading floor at the Exchange building in Nairobi on August 26, 2020. PHOTO | SALATON NJAU | NMG

By CHARLES MWANIKI
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The fall in share prices at the Nairobi Securities Exchange (NSE)  following a selloff induced by Russia’s invasion of Ukraine has raised the prospects of

higher dividend yields for investors who enter the mark under current conditions.

The NSE shed Sh108.3 billion in paper wealth between Monday and Friday last week as tensions in Ukraine rose and eventually Russian forces invaded the country, with large banks among the biggest losers in the period.

Coming close to the end of the reporting period for many companies for the 2021 financial year, the lower prices are seen by analysts as offering investors an attractive entry point to maximise returns from dividends.

Bank stocks are seen as the best bet for dividend hunters at the NSE, with the lenders expected to report much higher earnings for the 2021 financial year compared to 2020.

The lenders collectively made Sh194.8 billion in gross profit last year, which given their continued efforts to cut costs should translate into record net earnings.

“The allure of banking stocks dividends is expected to keep foreign investors interested in seeking entry positions,” said AIB AXYS Africa analyst Solomon Kariuki.

The telco’s stock was among the biggest losers in the Wednesday and Thursday selloffs, given its heavy exposure to foreign investors, but its surprise interim dividend of Sh0.64 per share announced on Friday helped it regain ground.Safaricom, the NSE’s biggest company by market capitalisation and also its most profitable has also become a favourite dividend stock due to its policy of paying out 80 percent of net earnings to shareholders.

The share price had fallen by nine percent from Sh37.95 on Monday to Sh34.55 on Thursday but rallied to trade at Sh35.65 on Friday.

Its interim dividend for the current year is also 42.4 percent higher than the one the company paid last year (Sh0.45), signalling that it expects to report bumper earnings in the year ending March 2022.

Listed firms had cut or frozen dividend payments in 2020 due to uncertainty over the covid-19 pandemic.

The subsequent recovery of the economy and the fact that many had piled up cash buffers in the period means that payouts have gone up.

cmwaniki@ke.nationmedia.com