Safaricom on May 10 reported that it had posted a 27.1 per cent rise in net profit to Sh48.4 billion in the year to March 2017 and that it would pay shareholders Sh38.9 billion in dividends — a 27.5 per cent increase from last year’s payout, sparking a rally in the company’s shares.
Mobile data revenue rose 38.5 per cent to Sh29.29 billion and M-Pesa revenue – the bread and butter of the telco – grew 32.7 per cent to Sh55.08 billion. Voice revenue slightly grew 2.9 per cent to Sh93.46 billion while SMS income dropped 3.7 per cent.
The rising price of the Safaricom stock has on several occasions forced analyst to back to the drawing board to upgrade the telco’s fair value.
Dyer & Blair Investment Bank has, for example, just issued the mobile service provider a one-year target price of Sh26.75.
“Earnings margin improvement and reduced capital expenditure intensity are expected to sustain generous dividend payments going forward,” said Dyer & Blair head of research Linet Muriungi in a report on the firm last week.
Safaricom has climbed 28 per in the past seven months on rising demand by both local and foreign investors eyeing its hefty dividend payout. The telcom provider opened the year at a price of Sh19.25.
Investors who bought Safaricom shares at the IPO in June 2008, at Sh5 a share, have grown their capital five times and have also enjoyed a consistent increase in dividends over the past nine years.