NAIROBI, Kenya, Jan 21- Telecommunications firm Safaricom has disclosed intentions of introducing a scheme where shareholders can opt to have their dividends used to purchase additional shares instead of cashing them out.
Chief Investor Relations Officer Les Baillie told a media briefing that through the Dividend Re-investment Plan, local retail shareholders particularly those with small number of shares would get the opportunity to increase their stake in the company.
“If we had this plan in place last year, we could have said to our shareholders that instead of receiving say Sh100, you can receive 25 shares which would be added on to their CDSC (Central Depository and Settlement Corporation) accounts and thus they would have the value in shares,” he explained adding that it would be advantageous to the company as well.
Last year, the company was faced with a dilemma of how to pay dividends to the then 830,000 shareholders most of whom held a minimum of 420 shares. A dividend payout of Sh0.10 saw such people take home a meager Sh42.
For the company, the plan would see them save millions shillings that are spent in dispatching dividend cheques. The mobile operator would for instance have spent Sh73 million last year had it opted to make the payment through the cheques.
“For the company, it means that we pay out some of the dividend in shares. It also means that we don’t have the expense of sending out a cheque to those customers,” the officer said adding that it cost them an average of Sh45 to produce and send one cheque.
Mr Baillie said they were in talks with the Capital Markets Authority (CMA) over the issue and hoped that they would get the go-ahead to implement the proposal which is common in the USA and the United Kingdom.
“I can’t guarantee that when we next announce our dividend that we will have the scheme in place because there is a lot of work that we have to do together with the CMA,” he said while revealing that another company was also considering implementing the same.
The dividend payment that was effected between November 13 and 17 saw Sh418 million paid out in cheques, which represented 44 percent of the total payments of Sh945 million. 180,041 shareholders received their dividends via the money transfer service, M-Pesa which although optional fell below Safaricom’s expectation.
It represented just six percent of the payments made. The other amount was dispatched through Real Time Gross Settlement and Electronic Funds Transfer.
The company’s board has also been working on a share consolidation plan which would see the nearly 40 billion shares in the hands of shareholders reduced. The plan which was mooted last year is however still under review.
At the same time, he said they would in the next three months also introduce an Employee Share Ownership Plan which will enable their staff to increase their shareholding in the firm.
This plan was included in the Initial Public Offer prospectus and would see the 99 percent of the employees who bought Safaricom shares increase their stake which would also motivate them to work hard in their duties.
A better performance from the company would impact on the share price which has in the last few weeks been on an upward trend after the publishing of a Morgan Stanley report that projected a rise in Safaricom share value.
Since January this year, the share price which is largely dictated by supply and demand forces has gone up by over 26 percent thus outperforming the Nairobi All Share Index.
At one point, it touched the Sh6.10 mark up from the Sh4.55 recorded on December 12. This week, the share has been trading at an average of Sh5.60 due to what Mr Baillie said was reduced buying.
Since late 2008 however, many local retail investors and corporates have been selling their shares owing to the poor performance of the equities market not just at the Nairobi Stock Exchange but in many bourses.
The numbers have decreased by 1.93 percent and 3.72 percent for local firms and local individuals respectively. The average amount of shares for a retail shareholder was 4,804 as at December 2009 down from 5,137 in December 2008.
On the contrary, the shareholding for foreign corporates has been on an upward trend and currently stands at slightly above 20 percent of the total free float.