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Listed firms expected to sustain dividend payout

By John Otini
Thursday, January 21st, 2021
Nairobi Securities Exchange. Photo/PD/FILE
In summary
    • Equity Bank expected to resume dividend payments faster and ahead of all the other banks. Equity recalled dividend payments last year.
    • The strong regulation by CBK will see banks remain cautious when it comes to dividend payout.

Safaricom, Kengen and agricultural firms are some of the counters at the Nairobi Securities Exchange (NSE) expected to maintain dividend payout at a time banks embark on capital preservation due to rising bad loans.

Commercial banks restructured loans in excess of Sh1.38 trillion last year as the industry fought to shield customers and balance sheet from ravages of the Covid-19 pandemic, as they issued profit warnings.

Despite the profit warnings by lenders, analysts expect Safaricom to continue its revenue growth from both M-Pesa and data alongside the expected entry into Ethiopia.

“While M-Pesa volumes may soften in the short-term from levels observed during the free transfer window, the low charges announced from January 1 is expected to reinvigorate transaction volumes in the medium term,” said Equity analyst Gerald Muriuki of Genghis Capital.

Safaricom’s aggressive rollout of fixed data connections with its large capital expenditure relative to rivals is also expected to keep cash flowing in.

The telco’s share price closed at Sh36.40 yesterday, continuing a rally that started late last year after Central Bank of Kenya (CBK) ended zero-rating charges of M-Pesa transactions up to Sh1,000.

Its stock hit a high of Sh37 last week, a surge from Sh34.25 on January 4 as foreign investors became net buyers, exciting the counter.

With respect to Kengen, analysts see increased capacity expansion such as the 165MW Olkaria 5 as followed by 83MW Olkaria 1 unit 6 as key growth drivers.

The increasing contracts from Ethiopia and South Sudan for geothermal drilling will also help it to diversify away from the single risk exposure to Kenya Power.

Dividend policy

“We expect the 33 per cent dividend policy to be sustained on the back of income growth from the capacity expansion initiatives and the additional non-electricity revenue channels,” Genghis said in a report.

Good rains will favour the agricultural stocks which are expected to continue doing well having been the only good performers last year other than Safaricom.

These stocks include Sasini, Eaagads, Limuru Tea and Williamson Tea. The challenge, however, is that these counters are not liquid and hence are not favourites for investors.

However, the impact of Covid-19 restrictions is expected to continue weighing in East African Breweries Ltd (EABL) but revenues will rebound this year as bars and restaurants have reopened though under less hours.

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