Ask any aspiring investor in the country, and they’ll tell you they would love to own a part of companies like Standard Chartered Bank, Bamburi Cement, and Crown Paints. Understandably, they are among the best dividend stocks in Kenya, according to the newest NSE ranking.
These publicly traded companies and many others, which I’ll discuss in this post, promise the best yield to their investors. And if you are a shareholder, you are more likely to smile en route to the bank.
That, however, doesn’t mean that these companies don’t make losses or that their dividends are guaranteed. No! And that’s why you may need to spread your risks among different dividend stocks and do your due diligence before investing.
This guide shall help you do that by not only flaunting to you the highest-yielding dividend stocks but also providing you with a guide on buying these shares:
Here’s what I’ll talk about:
- What are dividend stocks?
- How do dividend stocks work?
- Why invest in dividend stocks in Kenya?
- What are the downsides of dividend stocks?
- How do you choose the best dividend stocks?
- How do you buy dividend stocks?
- What are the highest-yielding dividend stocks?
Let’s jump in!
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In a hurry? Below are the top 10 highest-yielding dividend stocks as of April 17, 2023.
A Summary of the Top High Dividend Stocks in Kenya
|–||Dividend Stocks||Dividend Yield||1-Year Return||Market Cap (Ksh)|
|1.||Carbacid Investment PLC (CARB)||13.8%||7.4%||3.1 billion|
|2.||Standard Chartered Bank Kenya (SCBK)||12.9%||18.0%||73.9 billion|
|3.||Bamburi Cement PLC (BAMB)||12.8%||–22.8%||10.2 billion|
|4.||BK Group PLC (BKG)||12.5%||8.8%||29 billion|
|5.||Williamson Tea Kenya (WTK)||11.8%||27.0%||3 billion|
|6.||Stanbic Holdings (SBIC)||11.4%||6.2%||43.8 billion|
|7.||NCBA Group (NCBA)||11.3%||39.7%||61.8 billion|
|8.||Cooperative Bank of Kenya (Coop)||11.3%||3.1%||77.7 billion|
|9.||Crown Paints Kenya (CRWN)||11.1%||–5.3%||5.1 billion|
|10.||I & M Group (IMH)||11.0%||0.5%||33.9 billion|
What Are Dividend Stocks?
Dividend stocks are publicly-traded companies that regularly pay shareholders shared profits. These companies are publicly traded in Kenya at the Nairobi Securities Exchange (NSE).
Though dividends are never guaranteed, the prospects of receiving them regularly are much higher than in most stocks.
How Do Dividend Stocks Really Work?
One must first be a shareholder to receive dividends from a given stock. That means you must first buy shares which entitle you to the dividend distribution when the company makes money.
These companies share the earned profits with their owner (now shareholders) and may also pay dividends when there are no adequate reinvestment opportunities.
However, before the dividends are paid out, the Board of Directors (of the company) must declare their intention to pay them and set a payment date.
Why Invest in Dividend Stocks?
Let’s face it; you want to invest in something that benefits you. So, what are the advantages of dividend stocks? Well, they include the following:
- Dual money-making opportunity – Dividend stocks allow you to make money in two ways. One, these companies pay out dividends regularly as long as they profit. Two, the stocks increase in value over time, and the longer you keep your shares, the more money you make.
- Regular income – Through dividend payouts are never guaranteed, the prospects of making money are higher, which means a higher chance of earning a steady income.
- Passive income – Imagine earning money without doing hard work regularly. All you’ve to do is invest and wait for the payment. That’s what dividend stocks promise; they are a fantastic way to earn passive income.
- Solid investment – As long as you are a shareholder, you enjoy the benefits of having an investment that brings returns and appreciates. If you let go of your investment, you will likely make a good return than a loss.
- Compounding returns – With dividend stocks, you can always reinvest your dividends, allowing you to leverage the power of compounding returns. It means owning more stocks and earning more on the subsequent income distribution.
What Are the Downsides of Dividend Stocks?
No investment is risk-free, not even dividend stocks. Here are some of the downsides of buying these stocks:
- Tax burden – Dividend stocks, unlike growth stocks, are taxed twice. First, the company is taxed when making payments to shareholders. Two, the shareholders are taxed when they receive their dividends. The more you reinvest your dividends, the more the tax burden.
- Stocks may fail to grow as much as you may want – At the end of the day, the board of directors decides how much to reinvest into the business. Sometimes they are too skeptical about doing it, and since it’s beyond your power, you can’t grow as much as you would love to.
- Investment risk – Stock prices are never the same, they keep fluctuating, and sometimes the slump is too big to cause investors to panic.
- Policy changes – These companies sometimes change their policies to suit them more when the economic tides hit. It may mean slashing the dividends, and that’s too bad for shareholders.
How Do You Choose Companies with Highest Dividends in Kenya?
Given the investment risk associated with dividend stock, you would want to minimize them and make money from your investment.
But how do you do it? Well, here are some essential factors that enable you to choose the best dividend stocks:
a) Sector Trend
Don’t just buy shares in Kenya blindly. Consider those doing very well and have been so for a while. That means you may need to take some time to observe the sector’s trend by visiting the NSE website often. You can buy shares if your target dividend stock’s trend is impressive.
b) Dividend Yield
As you can tell from the table I shared earlier, the ten publicly traded companies are ranked according to the dividend yield, starting with the highest yield. Consequently, to buy stocks, consider those that pay the highest. But again, you must observe the trend to know if the stocks have been consistent.
c) The Less Debt, the Better
All companies have some form of debt they are struggling to clear, and that’s one reason they accept investors. However, since they are likely to pay down the debt with their profits, the bigger the debt, the lower your chances of earning meaningful dividends.
So, to be safe, avoid those companies with massive debt, which means doing your homework well.
d) Company Reputation
You wouldn’t want to put your hard-earned money in a young company without a proven record of sustainability or reliability.
You want a company with solid groundwork, a favorable economic climate, and proven leadership, which often applies to order brands.
e) Earnings Per Share
You must do some calculations to determine if a given stock is worth investing in. One such calculation is the Earnings Per Share (EPS), which you calculate by dividing the corporation’s net income by the number of circulating shares.
Typically, the higher the EPS value (at least 80%), the higher the success rate of a given stock.
f) 1-Year Return (1Y Return)
The 1-Year Return, sometimes known as the annualized return, refers to the rate at which a stock’s value increases yearly. You can tell from the table I shared earlier that other than Bamburi Cement PLC and Crown Paints Kenya, which have a negative 1Y Return, the others have a positive score, which shows their impressive performance over the past year.
g) Price-to-Earnings Ratio
Lastly, consider the stock’s Price-to-Earnings (P/E) ratio. This is usually determined by dividing the stock’s current price by its latest share earnings. Overall, the country’s average PE is 4.8x. Don’t, however, go for a very high ratio, as such companies are often overvalued.
How to Buy the Best Dividend Paying Stocks in Kenya?
Here’s how to invest in dividend stocks in Kenya:
Step 1 – Pick your preferred stock
Use the above tips to choose a dividend stock you prefer. Remember to take your time to choose wisely.
Step 2 – Pick a stock broker
You cannot trade directly at the Nairobi Securities Exchange. You need a stockbroker to facilitate the exchange. But given the long list of NSE-approved stock brokers, you may need to do your due diligence again to choose the right one.
Step 3 – Open a CDS Account
You need a trading account, and in the case of buying shares, we call it a Central Depository System (CDS) account. You can open one online with the help of your bank or stockbroker.
Step 4 – Buy Stocks
Given that you now have a CDS account and an NSE-approved stock broker for facilitating the trade, go ahead and buy the shares you want. After that, all you must do is wait for your shares to make you money and appreciate.
What are the Best Dividend Stocks in Kenya?
Below are the publicly traded companies paying the highest dividend in 2023:
1. Carbacid Investment PLC (CARB)
Carbacid Investment PLC is currently the highest dividend-paying stock. As of April 2023, CARB stocks had a dividend yield of 13.8% and a 1-year return of 7.4%.
Carbacid Investment PLC, which produces and markets carbon dioxide in the country, enjoys a P/E ratio of 4.1x, slightly below the country’s average of 4.8x.
However, in terms of earnings, they have grown by an average of 25.2% per year for the last five years. Today, the manufacturing giant is valued at Ksh 3.1 billion.
2. Standard Chartered Bank Kenya (SCBK)
Standard Chartered Bank Kenya is the highest dividend-paying bank in the country and the second overall. As of April 17, SCBK stocks enjoyed a 12.9% dividend yield rate and an 18% 1-year return.
Interestingly, SCBK stocks have grown by about 35.9% over the last year, which is a tremendous jump. The bank enjoys a 6.1x P/E ratio and a market capitalization of Ksh 73.9 billion.
3. Bamburi Cement PLC (BAMB)
Cement manufacturing Bamburi Cement PLC pays dividends at a rate of 12.8% which is pretty impressive. It, however, enjoys a negative 1Y Return of – 22.8%, which shows the earnings have dropped by 19.9% in recent years.
But other than that, Bamburi Cement enjoys a 16.4x P/E rate which could be a sign that it’s overvalued, and in terms of market size, the giant cement manufacturer is valued at Ksh 10.2 billion. Due to the recent price drops, Bamburi expects to pay Ksh 3 per share in dividends on May 10.
4. BK Group (BKG)
BK Group offers banking, insurance, brokerage, and digital solutions in Rwanda. While the banking giant does not provide services locally, its dominance in the region’s stock market can’t go unnoticed.
BKG has grown its revenue by 19.8% over the last five years, and the company is currently valued at Ksh 29 billion. Regarding dividends, the stocks pay 12.5% and enjoy a 4x P/E ratio, which is decent enough.
5. Williamson Tea Kenya (WTK)
Williamson Tea Kenya ranks highest in the food and beverage sector regarding dividends. The tea manufacturer has seen its stocks grow by 27% over the last five years and is currently estimated at Ksh 3 billion.
Dividend-wise, the rate is 11.8%, while the P/E ratio stands at 3.9x, slightly below the market average. The company plans to pay Ksh 20 per share dividends on August 12.
6. Stanbic Holdings (SBIC)
Stanbic Holdings is another big name in the banking sector that is doing well for itself and its members. The banking and insurance service company projects a yearly growth rate of 13.69% and has seen its stocks rise by 8.7% over the last five years.
The dividend yield rate at the time of writing was 11.4%, and the company plans to pay Ksh 7.30 per share on May 16.
7. NCBA Group (NCBA)
NCBA Bank is in the top 4 in the banking category, after Standard Chartered, BK Group, and Stanbic Holdings. Estimated to be worth Ksh 61.8 billion, NCBA Bank has experienced a 39.7% growth over the last year.
It enjoys a 4.5x P/E ratio, slightly below the market’s average, and pays dividends at 11.3%, which is not bad for a bank.
8. Cooperative Bank of Kenya (COOP)
The Cooperative Bank of Kenya is another financial giant with an impressive portfolio. The Kenyan bank has increased its revenue by 31.7% over the last year and is currently estimated to be worth Ksh 7.7 billion.
Co-Op Bank pays dividends at a rate of 11.3% and forecasts to grow its revenue by 16.1% yearly. Its P/E ratio is 3.5x which is below the market’s average.
9. Crown Paints Kenya (CRWN)
Paint manufacturer and seller Crown Paint is another big hitter in the stock market. Estimated to be worth Ksh 5.1 billion, CRWN revenue has grown by 16.8% over the last year and enjoys a P/E ratio of 8.8x.
Its dominance stretches beyond the country’s borders because it supplies paint and paint-related products to the broader East African Markets.
10. I & M Group (IMH)
Lastly, East African banking giant I & M Group completes the top 10 list with its 11% dividend rate. The company has seen its revenue grow by 37.7% in recent years and is now estimated to be worth Ksh 33.9 billion. Its P/E ratio is 3x, which shows the company is not overvalued and relishes a 0.5% 1Y return.
Closing Remarks On the Best Dividend Stocks in Kenya:
Above are publicly-traded companies paying the highest dividends as of April 17, 2023, and have been so far for a while. But as I explained, there are no guarantees when it comes to dividend stocks due to the unpredictability of the stock market.
So, you must take your time before investing in any dividend stock. And if you want clarification on any of the above publicly traded companies or another that couldn’t make this list, we will be happy to help if you talk to us on social media.