What to Check Before Buying Shares

Before you put your hard-earned money into any company, take a pause. Do a little homework first! Think of it like buying land — you’d want to know the soil quality, whether the title deed is clean, and the future plans for the area. Shares work the same way: you don’t just buy because the “plot looks nice,” you check what’s underneath.

🏦 Company Fundamentals Made Simple

This is the basic health check of the company — like a medical test before marriage 😅. You’re asking: Is this business strong enough to survive and grow?

📈 Profits – Are they making money every year or are losses piling up?
💸 Revenue (Sales) – Are sales increasing or shrinking?
🏦 Debt – Do they owe too much money, or are they handling loans wisely?

Example in Kenya:
Safaricom → High revenue, growing profits, manageable debt = healthy & stable.
Kenya Airways (KQ) → Huge debt, inconsistent profits, bailouts = risky bet.

👉 Rule of thumb: A company that consistently makes profits and controls its debts is a safer place to park your money.

🎁 Corporate Actions (Dividends, Bonus Shares & More)

Corporate actions are big decisions a company makes that directly affect you as a shareholder. They can either put cash in your pocket or ask for more money.

💵 Dividends – When the company shares part of its profits with you.
Analogy: Like receiving rent from a plot you own.
🎁 Bonus Shares – Extra free shares given to you for being a loyal shareholder.
Analogy: Like getting an extra plot for free.
🧨 Rights Issue – You’re offered more shares at a discount, but you have to pay for them.
Analogy: Like being offered a chance to buy more land cheaply, but you must find the money to do it.

👉 Before you buy shares, check if the company has been paying dividends, issuing bonuses, or doing frequent rights issues.

📢 Keep an Eye on Company News

Always check the recent updates or news about a company. A profitable business today can turn into a scandal tomorrow.

Sources to use in Kenya:

📊 NSE & CMA websites
📑 Brokerage reports
📰 Business Daily, Nation, Standard business pages
🌍 Google News, Twitter finance pages

Red Flag Tip 🚩: If the company is always in court, under audit, or linked with scandals — think twice before investing.

🌱 Focus on Sectors That Are Growing

Not every sector shines all the time. Some areas of the economy are booming while others struggle.

Hot Sectors in Kenya right now:

📲 Telecom → Safaricom
🏦 Banking → Equity, KCB, Co-op
🏭 Manufacturing → BAT, EABL
⚡ Energy → KenGen, KPLC

Analogy: Think of sectors like farms — some produce more in certain seasons. Plant your money in the farm that’s ready to yield.

✅ Quick Checklist Before Buying a Share

Here’s your pocket guide. Ask yourself:

📈 Are profits going up?
💵 Does the company pay dividends or give bonus shares?
📰 Is it in the news for the right reasons?
🌱 Is the sector active and growing?
🏦 Is debt at a safe level?
🧠 Do I understand how this business makes money?

If most answers are YES, then you’re likely looking at a worthwhile investment.

🧠 Final Takeaway

Buying shares isn’t about luck — it’s about informed choices. Just like you’d inspect land before buying, inspect a company before investing. Look at the health (profits, revenue, debt), rewards (dividends, bonuses), reputation (news, court cases), and sector trends.

The more homework you do, the fewer regrets you’ll have — and the higher your chances of building lasting wealth at the NSE.