Co-operative Bank tops East African retail banks’ dividend stock
Sunday October 22 2023
Cooperative Bank of Kenya group Managing Director Gideon Muriuki (L) during the quarter three results at the Sarova Stanley in Nairobi, Kenya on November 17, 2016. PHOTO | NMG
Kenya’s Co-operative Bank topped East Africa’s retail banks as the best dividend stock, signalling the lender’s increasing attractiveness to investors that are keen on cash dividend payouts.
Analysis from Africanfinancials shows the lender, which is listed on the Nairobi Securities Exchange (NSE), posted a dividend yield of 12.7 percent, the highest among the region’s top retail banks, in the six months to June 2023.
It was followed by Equity Bank (11.3 percent), KCB (9.6 percent), NCBA (11.2 percent) and DTB (10.4 percent).
Dividend stocks are shares of companies that pay investors a portion of company earnings on a regular basis.
Read: Co-op Bank bags best SME lender in Africa award
According to experts at the global financial advisory firm Forbes, investors tend to view consistent dividends as a sign of a company’s strength and as an indicator that a management team has positive expectations around future earnings growth. This, in turn, makes a company more attractive to investors, which in turn helps to drive up its share price.
“Paying a dividend allows a company to share its profits with shareholders, representing a gesture of gratitude for ongoing support but it is primarily an incentive for shareholders to continue holding their shares and to tempt prospective buyers of its shares,” says Forbes.
A dividend yield is a ratio that shows how much a company pays out in dividends, relative to its share price. It is calculated by dividing the total annual dividend amount per share by the market price per share.
Researchers at the Kenyan-based Genghis Capital say Co-op Bank has the potential to grow its share price to Ksh12.9 ($0.08) per share by March 31 2024 compared to the price of Ksh11.6 ($0.07) per share on October 18.
Read: Co-op Bank's net profit surges 33pc
This represents an 11.2 percent growth in share over the next six months, for a stock that has a “buy” recommendation.
Equity Group share price is projected to grow by 13.6 percent to Ksh42($0.28) per share while that of KCB ,which has a “sell” recommendation, is expected to decline by 1.1 percent to Ksh22.1 ($0.14) per share in the same period.
“We anticipate that the present inflationary pressures could dent consumer and business confidence marginally, leading to a mild deterioration in banks’ loan portfolio quality. As a result, we may see banks intensify loan collection efforts over the remaining part of 2024,’’ according to the analysts in a market report dated September 2023.
Read: NSE-listed banks post record loss of bad loans in 6 months
Market capitalisation
The anticipated share price appreciation could further boost the market value of the Co-op bank which has already beaten KCB to the second place in terms of market capitalisation.
Analysts at Africanfinancials, in a quarterly market report dated October 13, 2023, put Equity Bank’s market capitalisation at $888 million, followed by Co-op Bank ($467 million), KCB ($451 million), Absa Bank Kenya ($438 million) and NCBA ($421 million).
Others are Stanchart Kenya ($421 million), Stanbic Bank Kenya ($307 million), I$M Group ($190 million) and Diamond Trust Bank ($90 million).