For years, Kenya’s biggest listed conglomerate didn’t pay dividends and retained earnings to purchase more businesses. But now it’s paying dividends and even the Covid-19 pandemic won’t stop it.
Centum Investment Co. has experienced “muted” fallout from the coronavirus, Chief Executive Officer James Mworia said an interview after the group posted a 79% increase in full-year earnings. The company has paid down debt and now plans to increase its dividend payout in coming years, he said.
Centum’s move goes against the grain. Companies including Equity Group Holdings Plc, Kenya’s second biggest by market value, and Standard Chartered Bank Ltd. have opted to scrap 2019 dividends amid a slowing economy.
For eight years, Centum did not return cash to investors and only resumed dividends in 2016. The company will pay out 798 million shillings ($902 million) to shareholders for the year through end-March, unchanged from last year.
“Our view is that whatever dividend we declare, we should be able to sustain it over time, and we don’t want to cut the dividend,” Mworia said. Centum’s dividend policy is to pay whichever is higher between the previous year’s dividend and 30% of annuity income, he said.
As part of the strategy to boost investor payouts, Centum overhauled its assets portfolio by paring back from stocks and piling into high-yielding fixed-income securities. Currently 90% of its investments are in cash, government and corporate bonds.
Limited exposure to publicly traded companies cost it only 3.1 million shillings in coronavirus-related losses, while in real estate, sales of new housing units have dropped to an average of 24 per month from 40 previously, he said. Impact from private-equity investments will fall as a consequence of lower dividends by the companies in which Centum has stakes.
Investors want to see more, according to Nairobi-based Dyer & Blair Investment Bank. Year-to-date, the company’s shares have dropped 15%, compared with a 19% decline on the FTSE NSE 25-Share Index during the period.
“Although management is exploring a raft of measures to boost the share price, from having the major shareholder announce their intention to gradually raise their stake to just under 50%, raising the dividend payout and to implementing a share buyback, we believe that these strategies have to be accompanied with a change in the messaging to focus on a simple regular narrative of how they intend to unlock the latent value,” Dyer & Blair said in an emailed note.Read more: Centum Says […]