Safaricom dividend pay pulls NSE to one-year low

Securities trader Mbuthia Irungu at Nairobi Securities Exchange (NSE) trading floor at the Exchange building in Nairobi on August 26, 2020. PHOTO | SALATON NJAU | NMG Investors at the Nairobi Securities Exchange (NSE) lost Sh73.2 billion in a week and the value of the bourse sank to one-year low on reduced interest on Safaricom after the telecoms operator paid a multi-billion shilling dividend.

The market capitalisation dropped to Sh2.426 trillion on Thursday from Sh2.499 trillion when the bourse opened on Monday, marking the lowest valuation of shares since April 8 last year.

Safaricom, the country’s most profitable company, accounted for 95 percent of paper or Sh72.12 billion loss, underlining its dominance that is making it difficult for investors to gauge the performance of the bourse.

The telecoms operator had announced payment of a Sh25.6 billion interim dividend ahead of Thursday for shareholders on its register on March 17.

Safaricom declared a dividend payout of Sh0.64 per share, representing a 42.44 percent growth over the inaugural interim payout in the prior year.

This followed a 12.1 percent growth in net profit for the half year ended last September to Sh37.05 billion.

The telco’s share dropped to Sh34.15 on Thursday from Monday’s opening price of Sh35.95, driving the Nairobi bourse to a one-year low.

The influence of Safaricom on the bourse this week is informed by the fact its share of combined investor wealth at the NSE stood at 56.4 percent.

The telco claimed at least half of the market wealth nearly two years ago and has been deepening its share of the NSE wealth since then.

Already, the Capital Markets Authority (CMA) has flagged the dominance of five companies — including Safaricom — in the 65-stock market as a big risk, with the performance of the telecommunications firm dictating whether the market goes up or down on any given day.

This outsize influence of the stock on the market is also seen in the daily traded volumes, where often it accounts for over 65 percent of daily shares traded at the bourse.For investors, this has meant that holding Safaricom shares has become a necessity when building a portfolio, with its high liquidity and retention of value a magnet, especially for foreign investors. Expected profits A minimal fall in the Safaricom share price creates an impression that the market is underperforming despite other counters recording gains.Bank stocks that were expected to lift the market after lenders reported triple-digit growth in […]

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