KenGen’s share price collapse has seen the power producer become the top Nairobi Securities Exchange-listed firm in terms of dividend yield –the rate of cash returns measured against the prevailing stock price.
The company closed Tuesday with a dividend yield of 15.3 percent after its share price closed at Sh1.99, having dropped over the years from highs of Sh9 at the start of 2018.
The company paid a dividend of Sh0.3 per share for the year ended June 2023.
While long-term investors in KenGen have booked major paper losses, those buying the shares now are in a position to earn the highest dividend returns from the company.
KenGen overtook Uganda-based electricity distributor Umeme Limited which previously had the highest dividend yield on the NSE where it is cross-listed.
Umeme’s cash return stood at 14.07 percent on Tuesday and was followed by BAT Kenya (13.41 percent), Standard Chartered Bank Kenya (13.41 percent), Co-operative Bank of Kenya (13.22 percent), I&M Group (12.86 percent), Williamson Tea Kenya (12.85 percent) and property fund ILAM Fahari I-REIT (12.19 percent).
These are the companies with the highest cash returns on the NSE, helping investors to mitigate against the paper losses from the general bear run at the market.
Their dividend returns, however, still trail the interest rate on Treasury bills which have shot above 16 percent, reflecting the impact of risks, such as the weakening of the shilling, facing fixed income investors.
The decline of KenGen’s share price is despite improved profitability and dividend payout.
The company posted a net profit of Sh5.016 billion in the year ended June 2023, up from Sh3.38 billion the year before.
The power producer declared a total dividend of Sh1.9 billion or Sh0.3 per share in the review period, marking an increase of 50 percent from Sh1.3 billion (Sh0.2 per share) from the previous year.
The company has had an erratic dividend payment history, lifting the cash distributions and cutting them intermittently.
Umeme previously had the highest dividend yield of up to 18 percent but this has dropped as the company’s share price gained from lows of Sh9.9 in July last year to Sh14.95 on Tuesday.
The firm declared an interim dividend in the half year to June 2023 equivalent to Sh1 (at current exchange rates) as it accelerated debt payments ahead of the conclusion of its concession in March 2025.
The dividend will be paid on February 29, 2024, to shareholders who will be on record as of February 9, 2024.
The company recently issued a profit warning informing its shareholders and prospective investors that its net profit for the year ended December 2023 is expected to decline by more than 25 percent compared to the previous year.
This is attributed to the increased amortisation charge for the year, which resulted from aligning its non-current assets to the shorter remaining duration of its Electricity Distribution Concession.
The company has been running a 20-year power concession in Uganda that started in 2005.
The Ugandan government declined the firm's request to extend its concession when it ends next year.
