Investors buying shares at the at the Nairobi Securities Exchange (NSE) at prevailing prices are enjoying a return from dividends matching the rates earned by buyers of short-term government securities.
NSE data shows the dividends as a percentage of share price (known as dividend yields) for 18 listed firms range between 7.3 and 19.7 percent, having gone up as the share prices fell in the past two weeks.
The government is paying 7.3 percent for the risk free three-month Treasury bill, 8.2 percent for the six-month and 9.3 percent for the one-year paper.
Investors in the stock market earn a return on capital when share prices go up, better known as capital gains, or through dividend payouts.
Dividend yields are therefore a key indicator for more sophisticated investors who buy stocks with a longer-term outlook, as opposed to speculators who take positions solely to benefit from shares going up.
When share prices tumble the dividend yield goes up, provided companies maintain the level of payout.
NSE chief executive Geoffrey Odundo last week said that the low prices offer an attractive entry point for investors, whether they are chasing dividends or capital gains.
“Discounted stock prices of leading Kenyan companies listed on the NSE offer an attractive entry point to the stock market for both domestic and international investors looking for enhanced returns on their investment,” said Mr Odundo.
“The fundamentals of the listed companies continue to be strong supported by an enabling microeconomic and political environment. Additionally, there are renewed growth prospects in the country both in the public and private sectors.”
The highest dividend yields on offer are on the stocks of ScanGroup #ticker:SCAN at 27.4 percent, Kenya Re #ticker:KNRE (19.65 percent), Nation Media Group #ticker:NMG (19.57 percent) and the plantation stock Williamson Tea #ticker:WTK (18.2 percent).
Kapchorua Tea #ticker:KAPC, Longhorn #ticker:LKL and Ugandan power firm Umeme #ticker:UMME are carrying dividend yields of 15.4, 11.58 and 11.2 percent respectively.