The banking and agriculture segments have the best profitability record at the Nairobi Securities Exchange (NSE), making them the most attractive for investors chasing dividends in a period of limited capital gains on stocks.
An analysis of listed company financials shows the two segments are the only ones whose entire portfolio of constituent stocks made a profit in their most recent reporting periods, other than single stock segments such as investment services (NSE) automobiles (Car & General) and telecoms (Safaricom).
Companies in other segments have mixed profitability records, indicative of the difficult economic climate facing the private sector in the country in sectors such as services, energy, investments and manufacturing.
As a result, the banking and agriculture companies have emerged as the most reliable in dividend payments, where only two companies—Eaagads and HF Group— out of the 17 in these two segments did not pay a dividend in the past year.
Dividend yields for 11 of these firms are also in the double digits, beating the returns on fixed cash deposits even though they trail those of short-term government securities.
Out of the NSE’s 61 listed firms (excluding Reits and ETF), 32 paid dividends in the past year.
Buying into non-dividend paying counters is largely seen as a speculation with the market still trading below the last bull run peak seen in early 2015.
This has raised the influence of dividends, making profitable companies more attractive, especially those that combine their good performance with a generous dividend policy.
The low share prices resulting from the prolonged bear run have also raised the dividend yields for the majority of the stocks.
Firms such as Standard Chartered Bank Kenya, Williamson Tea, Kapchorua Tea, I&M Group, Co-operative Bank and BAT Kenya all have yields above 12 percent, as per latest share prices.
The non-dividend paying counters largely consist of firms persistently returning losses or those striving to stay in the green.
For the banking sector stocks, recent developments including the adoption of risk-based lending and the resumption of charges on bank-to-mobile transactions have helped boost income for lenders.
Commercial segment
Latest Central Bank of Kenya statistics show that the industry’s gross profit in the half year to June stood at Sh120.2 billion, up from Sh119.7 billion in the corresponding period in 2022.
On the other hand, the commercial and services segment offers the leanest returns in dividend terms, with only one company (Nation Media Group) making a payout in the last year.
In the investment segment, only Centum paid a dividend for the 2022 financial year.
