Kenya: Car & General up Sh746m on higher dividend payout

Car & General shareholders have enjoyed a Sh746 million gain in paper wealth at the Nairobi Securities Exchange (NSE) in the last five days on heavy demand for its shares amid limited supply following the announcement of a Sh3.20 per share dividend for the year ended September 2021.

The share closed at a six-and-a-half-year high of Sh49.20 on Wednesday, a gain of 60.8 percent from the Sh30.60 it traded at ahead of the release of its financial results last Thursday.

The company’s market capitalisation has now gone up to Sh1.8 billion from Sh1.27 billion a week ago, highlighting the allure of dividend payments in a market where capital gains have been stunted in the last few years.

It has gone up by the maximum of 10 percent in every trading session since the company told shareholders it was quadrupling its dividend from the Sh0.80 it paid for the year ended September 2020.

It is also giving its shareholders a bonus of one share for each that they hold, marking a rare occurrence of a listed firm combining a higher dividend payment with a bonus issuance.

Normally, firms issue bonus shares in lieu of a cash dividend payment, when they intend to conserve cash for capital needs.

The enhanced dividend follows the firm tripling its net income to Sh887.2 million in the year ended September 2021, with revenue going up by 41.4 percent to Sh17.1 billion.

C&G says its business performed well across the board, with rising demand for its brands of motorcycles and tuk-tuks while its lending arm Watu Credit also registered significant growth.

The stock is however trading on thin volumes —only 2,100 shares have changed hands in the last one week— largely due to reluctance by those already holding the stock to let go and in turn miss out on the dividend and bonus payment.

Analysts also said that the reluctance to sell may be on the presumption that the share price could still appreciate further nearer the February 25 and March 24 book closure dates on the dividend and bonus shares respectively.