Companies have resumed paying dividends to shareholders despite a difficult year as a result of the coronavirus pandemic that led to calls to conserve cash.
When the Covid-19 pandemic struck last year, it negatively affected the performance of many firms. Some resorted to suspend cash distributions forecasting weaker earnings. The pre-emptive move was meant to ensure they had ample liquidity should the pandemic persist.
But as the year ended and now a vaccine in the offing, companies are now reviewing those plans and are rewarding shareholders with even higher returns than in 2019.
Dividend payments in a difficult year will be a relief to shareholders and will be crucial in helping them cope after suffering from the dip in the economy that teetered to near recession.
The pandemic has also resulted either in redundancies and salary reductions which has a negative impact on people’s savings.
The government, which owns shares in some of the companies will be among the biggest gainers.
Safaricom #ticker:SCOM announced a surprise Sh0.45 per share dividend payout, prompting investors to scramble for their shares pushing the value of the company stocks to an all-time high of Sh38.50 and the paper value of the telco to Sh1.5 trillion.
Safaricom’s dividend announcement was a surprise to the market, given that the firm ordinarily does not pay interim dividends at the half year stage.
“The surprise dividend announcement at Safaricom and we have seen East African Breweries Limited #ticker:EABL rally over the past two weeks that has sort of lifted the market. I think the market is picking up success stories and running with it,” said Eric Musau, head of research at Standard Investment Bank.
Initially the market expected Safaricom to face a challenge after net profit in the half year ended September dropped six percent to Sh33 billion due to removal of fees on M-Pesa transactions of up to Sh1,000.
Despite the resumption of M-Pesa charges, the telcoms operator was forced to cut fees for low value M-Pesa transaction fees by up to 45 per cent.It now costs Sh6 to send between Sh101 and Sh500, down from Sh11. Transactions of between Sh1,501 and Sh2,500 cost Sh32 down from Sh41.The telco is hoping to rely on volumes to cover for the low earnings from fees after first-half earnings dropped six percent to Sh33.07 billion, mainly hit by a Sh6.08 billion or 14.5percent decline in M-Pesa revenue.The telco has a policy of paying out at least 80 percent of […]