Kenya Power (KPLC) — Dividend Trap or Smart Move? [FY2025 Review]

Kenya Power has finally announced a dividend after years of waiting — KSh 0.80 per share. Many investors are excited, but before you rush to buy, it’s important to understand what the numbers mean.

Previous article: What is dividend trap

While Kenya Power’s FY2025 operating cash flow looks strong at KSh 39.7 billion, a large part of this may actually be carryover (surplus) from FY2024 — not entirely new cash generated from 2025 operations. Let’s break this down in simple terms.

✅ FY2025 Audited Results — Kenya Power & Lighting Co. PLC

Profit After Tax (PAT): KSh 24.47B

Operating Cash Flow (OCF): KSh 39.70B

Capital Expenditure (CapEx): KSh 29.50B

Free Cash Flow (FCF): ≈ KSh 10.20B

Cash at year-end (2025): KSh 7.69B

Cash at year-end (2024): KSh 10.353B

Dividend per share (DPS): KSh 0.80

Total Dividend: ≈ KSh 1.56B

Non-current Liabilities: KSh 124.9B

Finance Costs: KSh 12.9B

💡 Understanding Free Cash Flow (FCF)

Free Cash Flow (FCF) represents the amount of cash a company has left after covering its operating expenses and capital expenditures. It reflects the true cash generation ability of a company — the amount available to pay dividends, reduce debt, or reinvest in growth.

Formula: FCF = Operating Cash Flow (OCF) - Capital Expenditure (CapEx)

📊 Kenya Power’s FCF for FY2025

• OCF: KSh 39.70B
• CapEx: KSh 29.50B

➡ FCF = 39.70 - 29.50 = ≈ KSh 10.20B

This means Kenya Power generated approximately KSh 10.20 billion in free cash — cash that’s available for dividends, debt reduction, or other corporate initiatives.

🏦 KPLC’s Position

Despite a drop in year-end cash from KSh 10.353B to KSh 7.69B, KPLC maintained strong cash generation and announced a KSh 0.80 DPS, translating to a total payout of about KSh 1.56B.

Overall, KPLC’s free cash flow performance in FY2025 signals operational stability and continued ability to meet its obligations while rewarding shareholders.

🧾 Quick Snapshot (FY2025)

Metric	KShs Million	Comment
Profit After Tax (PAT)	24,470	Net profit after paying all expenses and taxes — what’s left for shareholders.
Operating Cash Flow (OCF)	39,700	Real cash from operations — includes prior year surplus.
Capital Expenditure (CapEx)	(29,500)	Investments in lines, systems, and maintenance.
Free Cash Flow (FCF)	10,200	Cash left after investments — for dividends or debt reduction.
Dividend per Share (DPS)	0.80	Cash payout per share.
Total Dividend	≈ 1,560	About 15% of FCF — safely covered.
FY2024 Surplus Carried Forward	10,353	Unspent cash from last year aiding 2025 liquidity and payment of debts and loans.

💰 Step 1: Is the Dividend Safe?

KPLC is paying out only ~15% of its free cash flow as dividends. This means they are not borrowing or selling assets to pay shareholders — a good sign. However, a big part of that cash flow comes from money carried forward from 2024, not entirely from 2025 operations.

📊 Step 2: Debt Watch

• Non-current liabilities: KSh 124.9B — long-term project debts.
• Finance costs: KSh 12.9B — interest payments, significant but manageable.
• Cash balance: KSh 7.69B (down from 10.353B) — smaller liquidity cushion.

🧭 Step 3: Verdict — Dividend Trap or Smart Move?

The payout is covered by real cash flow but from 2024 cash surplus, not new borrowing — meaning it’s sustainable for now. But future stability will depend on how well KPLC reduces debt and maintains strong cash generation as older surpluses deplete.

💬 Final Thoughts — What Investors Should Ask

• Are debts being reduced or rolled over?
• How sustainable is FCF if CapEx rises next year?
• Why were FY2025 results condensed vs full audited format?

Note: Analysis based on FY2025 condensed results. Investors should look for or ask for full audited details before assuming a long-term turnaround.