Kenya’s Co-operative Bank Takes the Lead in Dividend Stocks

Co-operative Bank of Kenya has emerged as East Africa’s top retail bank for dividend stocks, making it a favorable choice for investors seeking attractive cash dividend payouts.

A recent analysis from Africanfinancials has revealed that this Nairobi Securities Exchange-listed bank achieved a dividend yield of 12.7 percent in the first half of 2023, the highest among the region’s prominent retail banks.

Co-operative Bank was followed by Equity Bank (11.3 percent), KCB (9.6 percent), NCBA (11.2 percent), and DTB (10.4 percent) in terms of dividend yields.

Dividend stocks represent shares of companies that regularly distribute a portion of their earnings to investors.

This consistent dividend payment is often perceived as a sign of a company’s financial strength and management’s positive outlook on future earnings growth.

Consequently, it enhances the attractiveness of the company to investors, contributing to an increase in its share price.

Paying dividends is a way for companies to share profits with shareholders, express appreciation for their ongoing support, and encourage them to retain their shares while attracting potential buyers.

The dividend yield is a crucial ratio indicating the amount a company pays in dividends concerning its share price. It is calculated by dividing the total annual dividend per share by the market price per share.

Analysts from Kenyan-based Genghis Capital predict that Co-operative Bank has the potential to increase its share price to Ksh12.9 ($0.08) per share by March 31, 2024, compared to the October 18 price of Ksh11.6 ($0.07) per share.

This equates to an 11.2 percent growth in share value over the next six months and garners a “buy” recommendation for the stock.

Equity Group is projected to achieve a 13.6 percent growth in share price to Ksh42 ($0.28) per share. In contrast, KCB, which holds a “sell” recommendation, is expected to experience a 1.1 percent decline in share price to Ksh22.1 ($0.14) per share over the same period.

Analysts believe that inflationary pressures might slightly impact consumer and business confidence, leading to a mild deterioration in the loan portfolios of banks. Consequently, banks are likely to intensify their loan collection efforts over the remainder of 2024.

Anticipated share price appreciation could further elevate Co-operative Bank’s market value, where it already surpasses KCB to rank second in terms of market capitalization. According to Africanfinancials, Equity Bank holds the highest market capitalization at $888 million, followed by Co-operative Bank ($467 million), KCB ($451 million), Absa Bank Kenya ($438 million), and NCBA ($421 million).

Other notable banks in the region include Stanchart Kenya ($421 million), Stanbic Bank Kenya ($307 million), I&M Group ($190 million), and Diamond Trust Bank ($90 million).