Dividend yields of more than a dozen Nairobi Securities Exchange- (NSE) listed companies are now higher than the prevailing Treasury bill rates, offering alternative investment option in a tough climate.
The prevailing yields on the 91-day, 182-day and 364-day T-bills stand at 6.59 percent, 7.37 percent and 8.99 percent respectively. NSE data shows as per Monday’s share prices, 17 firms had dividend yields that were at least matching or beating the lowest T-bill rate.
The rise in the dividend yields (dividend per share as a percentage of share price) is as a result of falling share prices at the NSE, with the benchmark NSE 20 share index trading at nine-year lows at 2646 points.
“Even if you take into account the charges on capital and the risk factor, these yields are matching the Treasury bills in returns. We should therefore see more inflows into the stocks,” said ABC Capital corporate finance manager Johnson Nderi. “The yields are a good hedge if fixed income yields keep falling.”
Five out of the 11 listed banks have a dividend yield that is at least higher than the lowest T-bill yield of the 91-day paper, with Barclays Kenya (10.48 percent) and Standard Chartered (9.69 percent) offering a higher yield than the one-year T-bills.
Other firms offering a dividend yield higher than the one-year T-bill include Kapchorua Tea at 10.93 percent, Williamson Tea at 12.16 percent, Nation Media Group at 10.78 percent, Umeme at 10.13 percent and Kenya Re at 11.31 percent.
ScanGroup has the highest dividend yield in the market at 34.78 percent, but this is on account of a special dividend of Sh3 per share that declared in April on top of an ordinary dividend of Sh1 per share.
Some of the firms offering high dividend yields have seen their share prices tumble in spite of recording a good financial performance. They have been dragged down by the overall bearish sentiment in the market.
On the fixed income end, the fall in Treasury bill yields to six-year lows is as a result of reduced government appetite for funds given the fiscal year is still young, and the fact that banks have been preferring to lend to government in the rate cap era.