By Tim Gathima
Safaricom shares are currently trading at Ksh38.81 and they announced an interim dividend of Ksh0.64 per share.
Going by last year’s trend and assuming that they pay a final dividend of Ksh1, your total dividends will be Ksh1,640,000 for your investment of Ksh38.81m
How does this compare to other investments?
If you had enough money to buy 1 million shares, your initial investment would be Ksh38.81 million and your interim dividend this round will be Ksh640, 000.
The dividend payment is slightly above 4 percent return per annum (assuming no brokerage fees for share purchase etc.) which is pretty decent, given that Safaricom is the bluechipest of the blue-chip companies.
If you invested the money with a fund manager like CiC whose return last year was a smidge above 9 percent, your interest payment at the end of the year would have been almost Ksh3.5 million.
A real estate investment of Ksh38.81 million ‘should’ yield close to Ksh270k per month (our properties are overvalued), hence the true rental income if you purchase in an upmarket area, the rent would be closer to Ksh150, 000 monthly and an annual amount of Ksh1.8 million.
A government paper at 9 percent would give similar returns to the managed fund returns, roughly Ksh3.5 million per annum.
I’ve valued many project using the discounted cash flow method and been involved in real estate over a decade to swear by the X144 multiple.
What options would you take?
One option is explained by Muthoni Maryanne
Then also once I get any interest I add it to the initial cash for example in the case of the Managed fund coz I know with that you can add or just find a way to have the interest making profit for me.
— Daughter of Muthoni (@MuthoniMaryanne) February 26, 2022
Good point. Capital gains are one good reason to buy and hold. Real estate also has capital gains but comes with maintenance costs. Each asset class has its upside and some have risks and downsides. Share prices also drop…
— Thee Mothy (@TimGathima) February 26, 2022
A pretty good analysis and insight provided. The govt paper looks a safer bet considering C19 and its effects, the election and potential political stability and war in Europe.
— Geoffrey Obuon (@ObuonSG) February 26, 2022
The article is unrolled from Tim Gathima’s Twitter thread.