Commercial, services and investment companies account for the lowest number of dividend-paying firms at the Nairobi Securities Exchange (NSE), indicating that the majority of them are yet to fully recover from the Covid-19-led recession of 2020.
Analysis of dividend payouts across the bourse shows that only one company — Nation Media Group — out of the 13 companies listed in the commercial and services segment has paid dividends in the past year.
Similarly, only Centum has paid dividends among the five listed investment firms.
The commercial segment has the largest share of listed firms on the NSE, although Deacons –which has suffered insolvency— and Kenya Airways remain suspended from trading.
Buying into non-dividend paying counters at the NSE is largely seen as a speculative venture with the market still trading below the last bull run peak seen in early 2015.
The insurance and construction sectors also have a minority of their constituent firms paying dividends, while the manufacturing sector had four out of its eight listees paying shareholders dividends in the past year.
In contrast, 10 out of the 11 listed lenders in the banking segment have paid dividends in the past year, and are on track to continue the cash distribution with the industry looking at record profits for the just-ended financial year.
Five of the six agriculture firms are also dividend paying, with the exception being coffee grower Eaagads, while Kenya Power was the only one among the four listed energy firms that failed to pay in the last financial year.
The ability and willingness to pay dividends is seen as an important barometer of a company’s financial health, signalling confidence of continued growth in profitability hence a reduced need to conserve capital through retention of earnings.
Banks have, for instance, loosened the purse strings in the past year after easing away from the uncertainty of the Covid-19 period, when they had been advised by their regulator to conserve capital as a buffer against economic shocks arising from the pandemic that brought a number of sectors to their knees across the world.
Preliminary industry results published by the Central Bank of Kenya (CBK) show they made a record pre-tax profit of Sh223.7 billion in the 11 months to November 2022.
Various analyses by investment banks have tipped banks to be the top-performing counters on the bourse this year, based on their earnings growth and anticipated higher dividend payouts.
The other sectors such as commercial, services and investments are still facing challenges, however, due to high inflation that has reduced spending power in the economy, and the subpar returns generated by the listed investment firms.
Manufacturers have at the same time been buffeted by the high cost of imported inputs due to global inflation, forcing them to raise the cost of their products which negatively affects demand.