Safaricom shareholders reap big from share price and dividend

In May this year, Safaricom hit a milestone by crossing the Ksh1 trillion capitalization mark. This was after its share price rallied to Ksh25 as investors gained confidence in the company, lifting the mobile services operator into its own league at the Nairobi Securities Exchange. This was a first for the NSE.

The share has been rising, touching a year high of Ksh33.5, in the process making millions for investors. A good number of retail investors are still holding the stock since its IPO in 2008 and thus grown their wealth from the Ksh5 listing price.

The stock has been trading at stable price of Ksh22, giving it a market capitalization of Ksh881 billion, nearly 40% of the total value of all the 63 listed companies at the NSE.

Since the stock opened 2017 at Ksh19.25, it has gained 14% in value, with investors’ wealth growing by the same margin. The gain has been attributed to increased demand by foreign investors eyeing dividends and the higher profits of Ksh55.3 billion announced for the full-year ending March 31^st 2018. Profit for the half-year ending September 30^th 2019 grew to Ksh31.5 billion, an indication that full year profits for 2019 could cross the Ksh60 billion threshold.

Higher earnings at Safaricom have been driven by growth in internet (data), its M-PESA payments business as well voice and SMS. The company is also exploring more revenue streams from video-on-demand service and online shopping through its Masoko retail portal. Safaricom has also ventured across borders with M-Pesa Global.

Safaricom’s share price is expected to rally ahead of the full-year results and analysts predict the stock could match its 2018 high of Ksh33.5, or even surpass it.

Besides the share price appreciation that has turned in millions for investors, Safaricom’s dividend record remains solid and consistent. In the 2018 financial year, shareholders were paid Ksh1.10 per share in dividends. This amounts to Ksh44.1 billion – an increase of 13.5% the previous year – going into investors’ pockets.

The share currently stands as a buy in anticipation of price growth and higher dividend at the end of the current financial year.

The return of CEO Bob Collymore from medical leave has added more confidence to the company. Market watchers bet Collymore will continue the innovation and expansion trend even as he focuses on improving quality of service, which will attract more customers.

Safaricom enjoys an unassailable lead in mobile subscriptions at 67%, accounting for nearly 30 million users, while its M-Pesa platform has over 23 million users and counting.

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Safaricom listed at Ksh5 a share in June 2008, but shareholders who endured a few years of subsequent low prices that culminated in the stock sinking to an all-time low of Ksh2.50 a share in 2011, are laughing all the way to the bank.

On the first day of trading, the share price shot up 47% leaving excited investors with plenty of money in their pockets. But the price dropped to below offer price, with cynics forecasting an even gloomy future for the stock at the NSE.

Turns out, however, it was the darkness before dawn as the savvy investors who stayed on and even increased their stakes at below offer price are having it nice.