The NSE, is the Nairobi Stock Exchange based in Nairobi and has 62 listed companies.
These stocks offer handsome yields and stability, sure. But many of them pack a total-return punch too. If you are the patient type of investor, dividend stocks may be the best for you. For a long-term investor, the key is to get the largest yield possible with the least amount of risk attached to it.
Companies with a large capitalization –preferable blue chips – with ample yields and a long history of rising payouts will serve your equity income portfolio given enough time. The trick is to find the best NSE dividend stocks and hang on.
Out of the top names in the index and other worth mentioning stocks, I have taken the liberty to compute the dividend yields of various stocks traded on the NSE and the best five stocks based on dividend yield alone in the NSE are as follows:
*Computation as at October 2016
CFC Stanbic Holdings Ltd.
Dividend Yield: 8.31%
With an average revenue growth rate 6.51% and earnings per share of 13.86, CFC Stanbic Holdings Ltd (CFCO) is steadily growing. Recovering from its one year low of -14.94%, investors are selling this stock due to deteriorating consensus as the company is projected to underperform the market.
For a value investor, the price-to-book multiple is at 0.78 translating to an undervalued company. Should the company recover banking sector-wide shake-up, this stock is a great investment long-term.
Standard Chartered Bank
Dividend Yield: 9.24%
Standard Chartered Bank (SCBK) stock is having a market-beating year with its gain of more than 6% in the last year, and the dividend follows that lead. Slow-but-steady growth is a basic part of the equation for a long-term investor. Thus, despite the shake-up in the banking sector, the bank has had an average long-term growth rate of about 23.6% in revenues. The forward price-to-earnings multiple of 8.22 gives the bank a compelling valuation.
Nation Media Group
Dividend Yield: 9.26%
Nation Media Group (MNGK) is another total-return winner with a high dividend yield and a price-to-earnings multiple of 9.16. Future prospects based on historical averages might see the company grow on revenue by 2.59%. However, with a 2.27 price-to-book multiple shows that this company’s stock is overvalued. A point of entry to purchase this stock will be crucial to ensure great future returns on stock price and earnings.
Kenya Electricity Generating Company
Dividend Yield: 9.42%
KenGen stock took a hit earlier this year despite a rights issue; the utility firms stock still remains profitable and outperforms the market. The average growth rate on revenue of the company stands at +27.34% and dividends expected to grow as well over time. Fairly valued, the Kenya Electricity Generating Company (KGEN) stock promises long-term price appreciation to go along with a steady dividend stream.
Barclays Bank Kenya
Dividend Yield: 12.42%
High dividend yield yet a gloomy forecast on the stock performance of Barclays Bank Kenya (BARC) in the future as it is predicted to underperform the market. This year, the stock has taken a hit with a downward decline by 35.83%, however, the upside is that the banks price-to-earnings multiple is 11.56 which might be hard to maintain.
Going Beyond the Dividend Yield For Value
When it comes to investing, many other ratios are used to guide decision making. Other metrics used are Price/Earnings to Growth Ratio, Free Cash Flows, Debt-Equity Ratio, Price-to-Book Ratio and finally Price-to-Earnings ratio. Each one measures various fundamentals of the organization and can be used to guide decision making.
Meanwhile, You can click on the following links to read more about investing and trading shares:
- 10 Laws of Building Wealth
- How to Buy Stocks Online on the Nairobi Stock Exchange
- 9 Biggest Investor Mistakes & How to Avoid Them Like A Ninja
- 3 Ways the Emotional Elephant is a Danger to Your Finances
- 4 Painful Ways to Lose Money
Disclosure: This information is provided to you as a resource for informational purposes only. It is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.
