Safaricom share price hit a new all-time high of Ksh20 yesterday, lifting the telecommunications firm’s market value to a record Ksh801.3 billion.
The share price rally on the Nairobi Securities Exchange (NSE) is driven by the telecom operator’s announcement on Tuesday last week of a special dividend of Sh0.68 per share, amounting to Sh27.5 billion, payable to shareholders on its register as of September 2.
The latest dividend payment adds to the Sh0.76 per share, amounting to Sh30.4 billion, that Safaricom declared for the year ended March. Both are payable in December.
At the current market price, Safaricom is now valued higher than all the listed banks and beer maker East African Breweries Limited combined. Safaricom now accounts for 38.4 per cent of the entire stock market valuation in what has raised concerns over its influence on the Nairobi bourse.
Trading in the company’s stock has accounted for 90.7 per cent of the Sh86.2 billion added to the total stock market since Monday last week, to stand at Sh2 trillion. The company’s premium valuation, which has seen it recover from lows of Sh2.7 per share in early 2009, is underpinned by its large market share in voice, data and financial services.
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Investors are rushing to buy the firm’s stock to pocket the total dividend of Sh1.44 per share, which represents a yield of 7.2 per cent based on the current market price. Safaricom’s decision to pay the extra dividend, which represents an interim payout for the current financial year ending March 2017, came after the firm paid all its debts in the wake of increased cash generation from its operations.
It signals that the company has more cash than it needs to fund its operations, including capital expenditure, which has topped the Ksh30 billion mark in recent years.
The positive outlook has further fuelled the share price rally that had already seen Safaricom stand out as one of the few counters on the rise amid the general bear run in the market that has seen other blue-chip stocks plummet by double digits.
Market data shows that buy orders on Safaricom’s stock have surpassed sale orders by over 10 million units in recent days, underlining strong demand for the counter. “Foreign investors turned net sellers of Safaricom (70.7 per cent of market activity) with net outflows at $111,160 compared to net inflows of $1.7 million,” said analysts at Standard Investment Bank in a note to investors.
The premium valuation signals increased investor confidence in the telecoms operator’s future prospects, with early shareholders reaping the most compared to those buying at the current price, which some analysts say is expensive.
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