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 does not include special dividends because they are not repeatable because it is based on payout for the most recent fiscal year.
With a payout of Sh53.5 per share for the year that ended in December, BAT had the highest payout ratio at 82.51 percent.
By increasing its interim payout by 42.8 percent to Sh5 per share for the six-month period ending in June, the cigarette manufacturer hinted at higher dividends.
Safaricom paid out more dividends than the 80% of net income that was specified in its dividend policy. The telco is distributing Sh1.39 per share, or 82.5 percent, of its net profit for the fiscal year that ended in March.
In the year that ended in December, Stanchart had a payout ratio of 79.3 percent, or Sh19 per share, and it has committed to distributing any future surplus capital.
“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 companies with the highest payout ratios face little competition, are mature, or don’t have any immediate plans to make significant capital investments. All of them are profitable and have a long history of paying dividends.
Even though these companies are the most generous in their distribution of profits, the actual dividend returns that investors receive are greatly impacted by the prices at which they purchase the shares.
While a cheap counter can turn a “mean” payout into a high dividend yield, an expensive stock can water down a generous dividend policy. For instance, a shareholder purchasing Safaricom shares at the current price can anticipate a dividend return of about 4.8%.
The telco has one of the highest payout rates, yet this still occurs.
KCB distributed only 28.2 percent of its net income in the year ended December, but an investor purchasing shares at this time is likely to book a dividend return of 7.7 percent.
The conservative policies of the majority of the listed companies, which distribute less than 50% of their net income to shareholders, are due to a number of factors.
While others, particularly in the insurance industry, are preparing for higher capital requirements, some are investing aggressively to expand locally and regionally.
As profits rise in the upcoming years, it is anticipated that absolute dividend payouts will rise. Businesses like Co-op Bank and DTB Group have already announced increases in their cash distributions.
The companies with the greatest ability to increase payouts should they decide to become less cautious are those who have been keeping the majority of their earnings.
