Dividend yields on a growing number of listed companies have beaten the returns from short-term government securities after a sustained decline in interest rates.
The current volatility in stock markets after the US slapped tariffs on its imports has also seen some of Kenya’s dividend-paying companies record lower share prices, boosting their dividend yields, which are measured as a ratio of the share price.
At the close of trading on Thursday, 19 companies had a dividend yield higher than the 91-day Treasury bill rate of 8.46 percent, with 12 of these also higher than the one-year T-bill rate of 10.07 percent.
On the fixed income side, the rates on the short-term securities have fallen significantly since August 2024, in line with the series of rate cuts by the Central Bank of Kenya (CBK) that have seen the central bank rate (CBR) go down to 10 percent from 13 percent.
The interest rate on the one-year T-bill had climbed to a high of 16.99 percent before the rate cuts, while the 91-day paper had touched a peak of 16.73 percent.
The majority of the companies offering yields higher than the prevailing T-bill rates are also trading cum dividend, meaning that investors buying now will qualify for the respective distributions relating to the 2024 financial year.
The highest yield on offer among those companies whose registers are yet to close for dividend purposes is Standard Chartered Bank Kenya at 14.99 percent.
The lender announced a final dividend of Sh37 per share in March, to be paid on May 28 to shareholders on its books as of April 30.
Stanchart had paid an earlier interim dividend of Sh8 per share, hence a total dividend of Sh45 per share for the year. The company’s share closed the week at Sh300.25, resulting in a yield of 14.99 percent.
Other companies with dividend yields above the one-year T-bill rate (including already distributed payouts) include Umeme at 16.63 percent, BAT Kenya at 13.5 percent, KenGen at 13.29 percent and BK Group at 12.2 percent.
Williamson Tea, Kapchorua Tea, Absa Bank Kenya, Co-operative Bank, I&M Holdings, NCBA, Stanbic Holdings and Kenya Power have dividend yields ranging from 8.47 percent to 11.97 percent.
Investors in the stock market earn a return on their 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 share prices going up.
When share prices tumble, the dividend yield goes up, provided companies maintain their level of payout.
A company’s ability to pay and increase dividends is seen as a strong indicator of good financial health and stability, and when that is combined with a high yield as a result of a low share price, it can point to an undervalued company.
