Investing in Safaricom shares vs treasury bills and real estate

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

 

The article is unrolled from Tim Gathima’s Twitter thread.

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