The record payout was hugely supported by Safaricom #ticker:SCOM and banks’ dividends, which helped ease the blow to shareholders who have lost tens of billions in share price erosion at the Nairobi bourse.
The giant telco and the lenders account for than 75 percent of the market value of NSE, which has shed Sh395.97 billion since the start of the year as foreign investors withdrew amid turmoil in global markets in the wake of the pandemic.
Restrictions imposed to curb the spread of the virus like nationwide dusk-to-dawn curfew and ban on public gatherings has hit consumer spending, and subsequently company sales and profits.
Listed blue chip firms that make the Nairobi Securities Exchange #ticker:NSE 20-Share Index have shrugged off a tough business environment and economic uncertainty due to the coronavirus pandemic to pay shareholders more than Sh102.9 billion in dividends
Their latest payouts represent an increase of 8.6 percent on the Sh94.8 billion the companies paid in 2018, signalling that their boards and managements are confident they have adequate cash to navigate the crisis.
The record payout was hugely supported by Safaricom #ticker:SCOM and banks’ dividends, which helped ease the blow to shareholders who have lost tens of billions in share price erosion at the Nairobi bourse.
The giant telco and the lenders account for than 75 percent of the market value of NSE, which has shed Sh395.97 billion since the start of the year as foreign investors withdrew amid turmoil in global markets in the wake of the pandemic.
Restrictions imposed to curb the spread of the virus like nationwide dusk-to-dawn curfew and ban on public gatherings has hit consumer spending, and subsequently company sales and profits.
It was expected that companies would cut or cancel dividends in the race to preserve cash during the coronavirus crisis, which hit Kenya in mid-March when firms prepared to announce their financial reports and declare dividends.
Kenya has 465 confirmed cases of coronavirus and 24 deaths with effects of the infectious disease leading to forecasts that the economy could contract one percent in the worst case scenario.
A few companies that are part of the benchmark NSE index such as NCBA Group #ticker:NCBA and Nation Media Group #ticker:NMG offered bonus shares and suspended cash distributions to shareholders, citing the need to preserve money.
Those leading in cash distributions are traditionally the most profitable companies, able to make the payouts and still add to their multi-billion-shilling cash reserves built over the years.
This has put them in a pole position to weather shocks, especially the economic fallout triggered by the spread of the coronavirus.
Others see the raising of dividends as the optimal use of cash in an environment where making big investments are not likely to yield adequate returns in the short term.
A few firms like Safaricom, on the other hand, are expected to go through the Covid-19 pandemic little scathed and may even benefit from increased demand for their services.
The telco declared a dividend of Sh1.4 per share or a total of Sh56 billion for the year ended March, a move that will see it retain Sh18.7 billion out of its Sh74.7 billion net earnings.
The company’s total payout in the previous year stood at Sh74.9 billion and consisted of a normal distribution of Sh1.25 per share (Sh50 billion in aggregate) and a special one of Sh0.62 per share (Sh24.8 billion).
“Whilst things will remain challenging in the short term, we believe we are well placed to weather this storm,” Safaricom said in a statement.
KCB Group #ticker:KCB declared a final dividend of Sh2.5 per share, pushing its total payout for the year ended December to Sh3.5 per share or a total of Sh11.2 billion.
The country’s biggest bank made the announcement before Kenya recorded its first Covid-19 case on March 12.
Banks are expected to register increased loans defaults on reduced corporate sales as job layoffs and pay cuts make it difficult for workers who had tapped credit on the strength of their payslips.
This will raise banks costs associated ‘with bad loans and potentially cut the lenders’ interest income.
Loans worth Sh81.7 billion have been restructured since late March, mainly in tourism, restaurants and hotels, real estate and trade.
BAT #ticker:BAT, Kenya Re and NSE are firms that form part of the benchmark index that have marginally cut dividends.
The dividends are key to putting money in the pockets of shareholders who require cash to meet personal expenses that ultimately boost demand in an economy where consumption has slackened.
Other listed banks, including Equity and Co-op, announced they would maintain or enhance their dividends during the period coronavirus started spreading in the country, indicating they are confident of riding out the crisis.
Equity raised its dividend from Sh2 a share to Sh2.5 or a total of Sh9.4 billion. Co-op Bank demonstrated its confidence by bringing forward its Sh1 per share or Sh5.8 billion dividend, which was paid on April 23.
In a surprise move, NCBA Group cancelled its earlier dividend declaration of Sh1.5 per share (Sh2.2 billion) and replaced it with a bonus share of one for every 10 held. The bank said it had changed its mind after taking stock of the potential impact of the pandemic on its business.
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