Uganda’s electricity distributor Umeme Limited which is cross listed on the Nairobi Securities Exchange (NSE) presents the highest dividend yield of 15.98 percent for investors moving into the earnings season next month.
The higher dividend yield comes ahead of the expected buyout of the company’s investors by the government of Uganda when the firm’s 20-year concession to distribute power in the country lapses on March 30, 2025.
It is unclear whether Umeme will declare a final dividend before the buyout even as the firm paid an interim dividend of Sh0.91 (26 Uganda Shillings) on October 31,2024 while recognising the need for prudency in cash flow management ahead of the concession termination date.
The firm’s dividend yield stood at 15.98 percent, the highest among NSE listed stocks based on its prevailing share price of Sh16.7 as of Monday this week and its current Sh2.66 dividend per share.
This implies that investors buying the stock at the current price will lock in a return of at least 15.98 percent if the firm retains or increases its most recent dividend per share (DPS).
Tobacco manufacturer BAT Kenya has the second highest dividend yield at 13.71 percent ahead of the disclosure of its 2024 full year earnings later this month.
BAT share price stands at Sh364.75 while its last dividend per share was Sh50.
Rwandese cross-listed lender BK Group meanwhile has a dividend yield of 11.75 percent- the highest of all banks, based on its prevailing Sh34.20 share price and a Sh4.02 dividend.
Stanbic Holdings Plc has the highest yield among local lenders at 10.3 percent, presenting the highest return for dividend hunting investors as banks set record profits.
Commercial banks set a record pre-tax profit of Sh262.3 billion in 2024, lifted by high lending rates and income from government securities.
The performance signalled a bigger headroom for banks to reward their shareholders with enhanced dividend payouts.
Market analysts expect banks to announce record dividend payouts next month when most lenders file their 2024 full year earnings.
“We expect dividends to be a key driver of price appreciation come March 2025 as banks announce their full year 2024 results, and in this respect, we expect Standard Chartered to announce the highest dividend payout ratio,” analysts at Sterling Capital said in a note.
The dividend yield is the amount of money a company pays its shareholders for owning a share of its stock and is arrived at by dividing the dividend per share with the current stock price.
A company’s ability to consistently pay and increase dividends is seen as a strong indicator of its financial health and stability.
Companies posting significant profits and cash flows are usually seen as the more likely to distribute dividends to their shareholders.
The dividend yield tends to close sharply upon the announcement of dividends as investors rush to lock in the return ahead of payment.
This reduces the opportunity cost for investors looking to make a dividend return from the market as the prevailing dividend yield is wiped out.
