Poor dividend season keeps foreign firm’s profit repatriation low and the shilling strong

Lower dividend payout by corporates and intervention by the Central Bank of Kenya (CBK) has helped the shilling hold steady even as dollar demand rises according to analysts.

The shilling held at a range of between 100.60 and 100.93 Monday against the greenback according to a Bloomberg News index that tracks the currency, where it has remained steady throughout the month.

This month is normally marked by high dollar demand as firms, especially banks with significant foreign shareholding, close register and buy dollars for dividend repatriation.

According to CfC Stanbic Bank Regional Economist Jibran Qureishi the current trend is explained by the fact that most companies chalked up below par performance last year and are thus paying less dividend.

“From our side we see that corporate earnings were a bit low so that maybe one of the reason, unlike previous years where demand for foreign exchange was robust,” he said.

Rich Management CEO Aly-Khan Satchu however said the fact that the shilling remained unshaken showed how strong it had grown, besides the confidence of the market in the CBK.

“The relatively light reaction by the shilling to the dividend payment season speaks to the underlying strength, so I think this dividend payout season will be a non-event for the shilling, in my opinion,” Mr Satchu said.

“Reserves (foreign exchange) are at a record high and the market perception of the Central Banker’s bona fides are sky high,” he said.

Mr Qureishi also noted that the shilling was propped up by the CBK which came in last week to sell dollars in the market.

“If you look at the CBK statistical data you will realise that week on week, the reserves have slightly gone down,” he said.

According to the CBK data, the amount of foreign reserves reduced for the second week in a row after hitting a record of 5.01 months of import cover in the first week of May.