Dividend Stocks, Growth Stocks & Corporate Actions (NSE Kenya)

🟢 A. Dividend Stocks & Dividends: What They Are and How They Work

✅ 1. What Is a Dividend?

A dividend is the money a company gives you as a thank-you for investing in it.

• When a company makes profits, it may choose to share part of those profits with its shareholders.
• You earn dividends simply by owning shares in the company.

📌 Example: If you own 1,000 Safaricom shares and they declare a KES 1.20 dividend per share, you receive KES 1,200 to your bank or M-Pesa.

📌 Analogy: Owning shares is like owning a rental house — you earn regular “rent” in the form of dividends.

✅ 2. What Are Dividend Stocks?

Dividend stocks are companies that regularly pay out profits to their shareholders.

• These companies are usually stable and profitable — examples include Safaricom, BAT Kenya, KCB.
• They are loved for providing passive income.

📌 Example: Safaricom has consistently paid dividends since it listed in 2008.

📌 Analogy: Think of dividend stocks as a fruit tree. As long as you own the tree (your shares), it keeps giving you fruit (dividends).

✅ 3. How Are Dividends Paid?

💰 A. Cash Dividends

• The most common type — money is sent to your bank account or M-Pesa.

Example: If Equity Bank declares a dividend, you’ll receive that money directly in your account.

📈 B. Bonus Shares (Scrip Dividend)

• Instead of money, you receive extra shares for free.

Example: In a 1:10 bonus issue, for every 10 shares you own, you get 1 extra share.

Analogy: Instead of receiving eggs, you’re given more chickens to produce even more eggs later!

✅ 4. Why Do Companies Pay Dividends?

• 🎁 To Reward Investors: It builds loyalty and appreciation.
• 📢 To Attract Long-Term Investment: Investors like regular income.
• 🧾 Because They Don’t Need All Profits: Mature companies share surplus profits.

Example: BAT Kenya pays large dividends because it doesn’t need to reinvest all its profits.

Analogy: Like a business owner sharing profits with their partners after covering all expenses.

✅ 5. Types of Dividends

🏁 A. Final Dividend

• Declared at the end of the financial year after audited results.

Example: Safaricom may declare a final dividend in May.

🔄 B. Interim Dividend

• Paid mid-year before final accounts are ready.

Example: KCB may pay an interim dividend in September and final in March.

🆓 C. Special Dividend

• A one-time payout due to an exceptional profit or event.

Example: A company may declare a special dividend after selling an asset for big profit.

📌 Analogy:

Final = End-of-year gift 🎁

Interim = Mid-term snack 🍪

Special = Surprise treat 🎉

📅 B. Dividend Timelines & Important Dates at the NSE (Kenya)

To get paid a dividend, owning shares isn’t enough — you must own them at the right time.

Companies follow a specific timeline with key dates that determine who qualifies for a dividend.

Let’s break it down step by step:

🗓️ 1. Declaration Date

• This is the official announcement date when the company says:
  “We’re giving out a dividend of KES 1.50 per share.”
• On this day, the company usually tells you:
  • The dividend amount per share
  • The ex-dividend date
  • The book closure date
  • The payment date

📌 Example:

Safaricom announces on June 5:

"We’re paying KES 1.20 per share as a final dividend."

This is the declaration date — it's like sending a wedding invitation in advance.

📘 2. Book Closure Date

• This is the cut-off date when the company checks its list of shareholders (called the register).
• You must appear on this list by this date to receive the dividend.

📌 Example:

Safaricom says book closure is June 20.

If your name is not on the list by this day, you don’t get paid.

📌 Analogy:

It’s like being on a guest list. If your name isn’t there when they close the gate — you miss the party.

⛔ 3. Ex-Dividend Date (Most Confusing, But Very Important)

• This is usually one trading day after the book closure.
• If you buy shares on or after this date, you do NOT get the dividend.
• To qualify, you must buy BEFORE this date (book closure).

📌 Example:

Ex-dividend date is June 21.

• Buy shares on June 20 → ✅ You qualify for the dividend.
• Buy shares on June 21 or later → ❌ You don’t qualify.

📌 Why?

Because of the pre-funding rule in Kenya. You have already paid for shares, so you qualify — this is different from international markets.

📌 Analogy:

Think of buying a concert ticket — if you buy it too close to the event, the system might not register you in time to attend.

💵 4. Payment Date

• This is the day the company actually pays the dividend into your bank account or M-Pesa.

📌 Example:

Safaricom says:

"Dividend will be paid on July 15."

If you qualified (bought shares before the ex-date), you’ll receive the money on or shortly after this date.

📌 Analogy:

It’s like salary day — you worked (invested) earlier, and now the cash hits your account.

✅ FULL TIMELINE EXAMPLE (With Real Dates)

Event	Date
Declaration Date	June 5
Book Closure	June 20
Ex-Dividend Date	June 21
Payment Date	July 15

If you bought shares on June 20 or earlier, you will receive the KES 1.20 dividend per share on July 15.

If you bought shares on June 21 or later, you will not receive the dividend, even though you now own the shares.

🧠 Quick Recap Table

Term	What It Means	Easy Analogy
🗓️ Declaration Date	Announcement of the dividend	Like sending a wedding invitation
📘 Book Closure	Final date to appear in company’s record	Like closing the guest list
⛔ Ex-Dividend Date	Cut-off to qualify — buy before this date	Like buying a ticket before deadline
💵 Payment Date	Day money is deposited in your account	Like salary day after work

💼 C. How to Track Dividend Announcements

So you’ve learned about dividends — but how do you actually know when a company declares one?

Here’s how investors and beginners can keep track of dividend announcements and other important updates like bonus shares and rights issues:

✅ 1. Use the NSE Pricelist – Check “Corporate Actions” Section

The Nairobi Securities Exchange (NSE) publishes a daily document called the NSE Pricelist.

This isn’t just a list of share prices — it also contains a section called "Corporate Actions", which includes:

• 📌 Upcoming Dividends
  Companies that have declared dividends and are about to pay them.
• 🎁 Bonus Issues
  Companies giving free extra shares to existing shareholders.
• 🎟️ Rights Issues
  Companies offering existing shareholders a chance to buy more shares at a discount.

📌 Example:

On the NSE Pricelist, you might see:

“Equity Group declares a KES 1.50 dividend. Book Closure: June 30. Payment Date: July 20.”

📌 Where to find it:

Visit the official NSE website → Look for the daily price list (PDF). Scroll to the Corporate Actions section near the end.

📌 Analogy:

It’s like checking a school noticeboard for upcoming events — everything is in one place, updated daily.

✅ 2. Ask or Follow Your Stockbroker (e.g., AIB-AXYS)

Most stockbrokers — like AIB-AXYS Africa — make it even easier by:

• Sending clients email or SMS alerts when new dividends are announced.
• Providing research reports that include:
  • Dividend-paying companies,
  • Yield analysis (how much income you earn per share),
  • Payment dates and deadlines.

✅ 3. Follow Our Blog (You’re Already Here!)

To help you even more, this blog will:

• Break down dividend announcements from the NSE and explain:
  • Who qualifies
  • What to do if you want to invest before the payout
  • How bonus shares and rights issues affect your portfolio
• Give real examples and simplified tables to help new investors understand everything.

📌 Why this helps:

Many investors miss dividends because they don’t follow announcements in time. This blog will ensure you never miss a chance to earn.

📌 What’s coming:

• NSE corporate actions (with simplified explanations)
• Dividend income opportunities
• Growth vs income stock strategies

✅ Summary: Best Ways to Track Dividend News

Method	What It Offers	Best For
📄 NSE Pricelist	Official info on dividends, bonuses, rights	Daily or weekly checking
📢 Broker Alerts (e.g. AIB)	Emails, research report	Busy investors & clients
📝 This Blog	Explanations in simple terms	Beginners & learners

💵 D. Cash vs Bonus Shares as Dividends

When a company declares a dividend, it can reward shareholders in two main ways:

• 💰 By giving them cash
• 📈 Or by giving them extra shares (bonus shares)

Let’s break down both options and understand when and why companies choose either method.

✅ 1. Cash Dividend

This is the most common type of dividend — the company simply sends money to your bank or M-Pesa account.

🔹 What Happens:

You receive a specific amount per share.

Example: If the company declares KES 2.00 per share and you own 500 shares, you’ll get:

KES 2.00 × 500 = KES 1,000 directly to your account.

🔹 Why It’s Popular:

• Great for passive income — you can use it for expenses, saving, or reinvesting.
• You can reinvest by buying more shares yourself.

📌 Analogy:

It’s like owning a rental property that pays you rent in cash every month.

✅ 2. Bonus Shares (Also Called Scrip Dividend)

Instead of giving you money, the company gives you extra shares for free.

🔹 What Happens:

You don’t get cash, but your total shares increase.

📌 Example:

If the company announces a 1:10 bonus, it means for every 10 shares you own, you get 1 extra share.

If you own 1,000 shares, you get:

1,000 ÷ 10 = 100 bonus shares

New total: 1,100 shares

🔹 Why Investors Love Bonus Shares:

• You own more of the company without buying more shares.
• You earn higher dividends next time since you now hold more shares.
• If the share price increases, your total value also grows.

📌 Analogy:

It’s like being given an extra plot of land — so next season, you grow more crops and earn more.

🧐 Why Would a Company Give Bonus Shares Instead of Cash?

• The company wants to reward shareholders but still needs to keep cash for its own use (e.g., expansion or paying debt).
• Bonus shares let you grow your investment while the company keeps its money.

🔹 Think of it this way:

• Cash Dividend = You get money, the company has less cash.
• Bonus Shares = You get more ownership, the company keeps its cash.

✅ Summary: Cash vs Bonus Shares

Type	What You Get	Best For	Analogy
💰 Cash Dividend	Money in your account	Passive income, reinvestment	Like receiving rent from property
🎁 Bonus Shares	Free extra shares	Growing ownership long-term	Like getting free land to farm

📈 E. Growth Stocks: What They Are and How They Work

Not all companies listed on the Nairobi Securities Exchange (NSE) pay regular dividends. Some choose a different path — they focus on growing their business fast. Instead of sharing profits with shareholders, they reinvest that money back into the company.

These are called growth stocks.

✅ 1. Growth Stocks = Focus on Expansion, Not Dividends

Growth stocks are companies that are still in their rapid growth phase. They have a strong vision for the future and big plans for expansion.

🔹 Instead of:

• Paying out profits to shareholders as dividends,

🔹 They prefer to:

• Reinvest profits in things like:
• Opening new branches
• Expanding into new markets
• Launching new products
• Improving technology or hiring more staff

📌 Example:

A tech startup or fast-growing bank like Equity Group may decide not to pay dividends regularly. Instead, they reinvest profits to grow their business, increasing the company's value.

📌 Analogy:

Think of a farmer who uses every coin from their first harvest to buy more land and better seeds. They don’t give you cash now — but next year, the harvest could be much bigger.

✅ 2. You Make Money Through Capital Gains (Price Growth)

When you invest in a growth stock, you are betting on the company’s future.

• You don’t get regular cash (dividends),
• But your shares grow in value as the company grows.

🔹 Capital Gain = Profit from Selling at a Higher Price

Example:

You buy shares at KES 20 each. After 2 years, the share price rises to KES 45.

If you sell, you make KES 25 per share.

If you owned 1,000 shares, your profit is:

KES 25 × 1,000 = KES 25,000

📌 Real NSE Example:

Safaricom IPO price in 2008 was KES 5.00. By 2022, it traded above KES 40. That’s an 8× increase in value for long-term investors

🧠 Recap: Why Invest in Growth Stocks?

Feature	Growth Stocks
📉 Dividends	Usually not paid (or irregular)
📈 Share Price	Grows as company expands
💰 Your Profit	Comes from selling at a higher price (capital gains)
🏗️ Company Strategy	Reinvests profits for future growth
⏳ Ideal For	Long-term investors with patience

🎯 Who Should Invest in Growth Stocks?

• Young investors who don’t need income right away
• People who want to build wealth over 5–10 years
• Investors who believe in the company’s future success

📌 Tip: Many smart investors mix dividend stocks (for income) and growth stocks (for long-term capital gain).

🔁 F. Other Corporate Actions Explained

Companies listed on the Nairobi Securities Exchange (NSE) often make strategic decisions that affect shareholders. These decisions are called corporate actions. Understanding them helps you become a smarter investor and avoid surprises.

✅ 1. Bonus Issues (🎁 Free Shares)

This is when a company gives you extra shares for free. You don’t pay anything — it’s a reward for being a shareholder.

📌 Example:

A company announces a 1:5 bonus issue. For every 5 shares you own, you get 1 extra share. If you have 500 shares, you’ll receive 100 bonus shares — now you own 600 shares.

✅ Why Companies Do This:

• To reward investors without spending cash
• To increase the number of shares and make them more affordable

🧠 Analogy:

Like a loyalty card — “Buy 5 coffees, get 1 free!”

✅ 2. Rights Issues (🎟️ Discounted Shares)

In a rights issue, the company gives current shareholders the option to buy more shares at a discounted price.

📌 Example:

You own 1,000 shares. The company offers a 1:4 rights issue at KES 8, while the market price is KES 10. You’re allowed to buy 250 more shares at a discount.

✅ Why Companies Do This:

• To raise money for expansion or debt repayment
• It's cheaper than borrowing money from banks

🧠 Analogy:

Your favorite store gives you a discount coupon for being a loyal customer.

✅ 3. Stock Splits (📏 Make Shares More Affordable)

Stock splits occur when a company divides its shares into smaller units to make them more affordable and boost trading activity.

📌 Example:

You have 100 shares worth KES 100 each. The company splits the shares 1:5. Now you have 500 shares worth KES 20 each — same value, more pieces.

🧠 Analogy:

It’s like cutting a large cake into smaller slices so more people can enjoy it.

✅ 4. Reverse Splits (🔄 Rare)

This is the opposite of a stock split — the company combines multiple small shares into fewer big ones to raise the share price.

📌 Example:

You have 1,000 shares at KES 1 each. A 1:10 reverse split gives you 100 shares worth KES 10 each.

✅ Why Companies Do This:

• To increase share price and attract serious investors
• To meet exchange listing requirements

🧠 Analogy:

Like exchanging 10 coins for one larger coin of equal value.

✅ 5. Dividends (💰 Cash or Shares)

As covered earlier, dividends are profits shared with shareholders, either in cash or bonus shares.

📌 Example:

Safaricom pays KES 1.20 per share. If you own 1,000 shares, you receive KES 1,200 directly.

✅ 6. Mergers & Takeovers (🤝 Companies Combine)

This happens when two companies join forces (merger) or one buys out another (takeover).

📌 Example:

If Company A merges with Company B, your shares may be converted into shares of the new merged company. Or you may be paid cash to exit.

✅ What It Means for You:

• You might receive new shares in the new company
• Or be paid to give up your current shares

🧠 Analogy:

It’s like two supermarkets merging — they combine shelves, customers, and staff.

✅ Summary Table: Common Corporate Actions

Corporate Action	What It Means	Benefit or Risk	Simple Analogy
🎁 Bonus Shares	Free shares given	Increases your holdings	Loyalty reward
🎟️ Rights Issue	Discounted share offer	Cheaper buying opportunity	VIP sale for members
📏 Stock Split	1 share becomes many	Makes shares affordable	Cutting a cake into more pieces
🔄 Reverse Split	Many shares become fewer	Raises share price	Combining small coins
💰 Dividends	Profit paid as cash/shares	Earn income from investments	Like rent or bonus for investing
🤝 Merger/Takeover	Two companies combine	Ownership may change	Two shops becoming one

✅ Recap Table (For Easy Understanding)

Topic	Meaning	Example
📥 Dividend	Profit paid to shareholders	Safaricom pays KES 1.20 per share
📊 Growth Stock	Reinvests profit to grow fast	Company with rising stock price but no dividend
🆓 Bonus Share	Free extra shares	1:10 bonus → get 1 for every 10
🎟️ Rights Issue	Buy more shares at discount	KCB offers new shares at KES 30
💳 Cash Dividend	Money in your account	KCB pays KES 1.50 directly to bank
🧾 Book Closure Date	Last day to be in records	Must buy shares before this date
⚠️ Ex-Dividend Date	Buy before this to qualify	Buy before June 20 to get paid