BAT Kenya, Safaricom, and Standard Chartered Bank Kenya are the most generous listed companies in terms of dividend payout, distributing more than 79 percent of their net income to shareholders.
This analysis is based on the payout for the latest financial year and excludes special dividends which are not repeatable.
BAT had the highest payout ratio of 82.51 percent in the year ended December when it distributed the equivalent of Sh53.5 per share.
The cigarette manufacturer has signalled higher dividends, lifting its interim payout in the half year ended June 42.8 percent to Sh5 per share.
Safaricom exceeded its stated dividend policy of remitting 80 percent of net income to shareholders. The telco is distributing 82.5 percent of its net profit for the year ended March equivalent to Sh1.39 per share.
Stanchart had a payout ratio of 79.3 percent or Sh19 per share in the year ended December and has promised to distribute any excess capital going forward.
“The board is very clear that we want to make sure the business will retain enough capital and we don’t need to hold anything in excess,” said chief executive Kariuki Ngari in March.
“If when we don’t need the capital, you give it back to shareholders and that remains. We are operating on regulatory requirement ratio and a buffer we give ourselves to make sure if there any shocks we are able to absorb them and we don’t want to come back and ask for shareholders for additional capital.”
The firms with the highest payout ratios have little competition, have matured, or have no plans to invest large amounts of capital soon. They are all profitable and have a strong tradition of paying dividends over the years.
While these firms are the most generous in distributing the profits they make, the actual dividend returns their investors earn are influenced significantly by the prices at which they buy the shares.
An expensive stock can water down a generous dividend policy while a cheap counter can translate a “mean” payout to a high dividend yield. An investor buying Safaricom’s shares at current levels, for instance, can expect a dividend return of about 4.8 percent.
This is despite the telco having one of the most generous payout rates.
An investor buying KCB shares now is likely to book a dividend return of 7.7 percent despite the bank distributing only 28.2 percent of its net income in the year ended December.
Most of the listed firms pay out less than 50 percent of their net income to shareholders, with the conservative policies linked to various factors.
Some are investing aggressively to expand locally and in the region while others –especially in the insurance sector— are bracing for higher capital requirements.
Absolute dividend payouts are expected to rise in the coming years as profits increase, with companies such as Co-op Bank and DTB Group indicating they will lift their cash distributions going forward.
Firms that have been keeping most of their earnings have the biggest capacity to raise payouts should they choose to become less conservative.