East Africa: Safaricom Post-IPO Investor Wealth Rises to $13bn Peak

The Safaricom stock hit a historic peak last Friday, closing at a high of Ksh32.80 ($0.32) per share, thereby swelling investor wealth eightfold since its listing on June 9, 2008, inclusive of dividends.

Shareholder wealth as measured by market capitalisation has now touched Ksh1.314 trillion ($13.14 billion), representing an increase of a whopping Ksh1.114 trillion ($11.14 billion) from the time the company listed 40 billion shares at Ksh5 a share 11 and a half years ago.

When the company’s cumulative dividend pay-out totalling Ksh301.2 billion ($3.012 billion) over the 12-year period is added, Safaricom investors have enjoyed a return of 708 percent on initial investment of Ksh200 billion ($2 billion). The dividend alone has been enough to allow investors to recoup their capital at listing and remain with an additional Ksh101.2 billion ($1.012 billion) balance.

The gains last week also pushed the company valuation as a share of the entire market to 50.4 percent and underlined its dominance on the stock market. Crossing the 50 percent threshold means Safaricom’s market worth is now more than the combined valuation of all the other 61 listed companies.

Analysts have attributed the rally in the last one year to sustained foreign demand, with the growth in dividends being a key factor in driving its attractiveness to investors who have few other options to make money in the market.

"The feel-good factor surrounding Safaricom has spilled over into the New Year, on bullish sentiments by foreign investors," said Standard Investment Bank analysts in a note.

Last year, the stock led the market in net foreign inflows at Ksh4.6 billion ($46 million), which backed a share price gain of 42 percent to Ksh31.50 between January and December 2019. During the year, foreign investors accounted for 75.4 percent of total traded volumes on the counter.

Since the beginning of this year, the stock has gained 4.1 percent. The company’s ability to continue to generate record profits — combined with a generous dividend policy that sees it pay out 80 percent of net earnings to shareholders — helped maintain demand through a bear run that gripped the NSE between 2015 and mid last year.

Safaricom has managed to make large capital investments in telecommunications infrastructure, introduce new services and pay incremental dividends with minimal debt and without seeking additional funding from shareholders.

The firm has therefore been able to build up cash reserves quickly, culminating in two special dividend pay-outs in the past four years.

In […]

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