Inside NSE firms raising dividends despite fall in profits

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More firms listed on the Nairobi Securities Exchange (NSE) have defied profit drops to increase dividend payouts amid pressure on management to share the falling earnings.

Regulatory filings indicate that nine firms increased or maintained dividends despite a fall in profits, while a further nine raised the shareholder payouts at a faster rate than earnings growth.

Absa Bank Kenya, Standard Chartered Bank Kenya (StanChart), BOC Kenya, Centum Investment Company and Kenya Power have raised dividends despite falling profits, while TPS Eastern Africa, CIC Insurance Group, Kenya Re and Liberty Kenya Holdings maintained payouts despite weaker earnings.

This is a windfall to shareholders who have also made market capital gains on the stocks in the wake of a market share rally, which has seen the Nairobi bourse post a 26 percent return since the start of the year.

Analysts link the dividend payouts to pressure on management to reward investors, the maturity of some listed firms and fewer opportunities for aggressive expansion.

“The general trend on the NSE over the past two years is that share prices have gone up, with investors moving away from fixed-income instruments and more into equities. There could be some pressure on management to ensure that they deliver returns commensurate with their share price,” said Erick Musau, executive director for research and sustainable finance at Standard Investment Bank.

This points to companies placing greater emphasis on shareholder returns as they navigate weaker margins, subdued demand and high operating costs in corporate Kenya.

“Dividend management also helps companies avoid shareholder discontent. If management fails to deliver value to shareholders, that is when they become vulnerable to removal. But when companies reward shareholders through dividends, they become less vulnerable to being replaced,” said Mr Musau.

BOC Kenya is the latest to raise dividends faster than earnings, increasing its interim payout by 60 percent to Sh4 per share despite a 39.8 percent decline in net profit to Sh100.37 million for the half year ended June.

Absa and StanChart followed the trend, raising interim payouts despite lower half-year earnings.

Absa increased its dividend per share by 150 percent to Sh0.50 from Sh0.20 despite a 9.8 percent decline in net profit to Sh10.53 billion. StanChart raised its interim payout by 6.3 percent to Sh8.50 despite a 16.8 percent decline in net earnings.

Absa Kenya, which is majority-owned by South Africa’s Absa Group, said it had adequate capital to support loan book and deposit growth without breaching regulatory capital requirements.

“We have done what we call stress tests on our business, and we are comfortable with our capital levels. So with that, we say we can distribute more earnings. It is not that we are not ready for business. We are, and actually our book has picked up so much,” said Yusuf Omari, interim CEO at Absa Kenya.

Mr Musau said firms with multinationals as anchor shareholders such as StanChart, BAT Kenya and East African Breweries PLC (EABL) also have an incentive to pay dividends because they provide a key avenue for the top owners to extract returns.

“For many multinationals, the only way to get money out of the business is by declaring a dividend and, for that matter, as high as possible,” he said.

The decisions suggest that dividend policy is increasingly being influenced by factors beyond the latest annual earnings figure, including companies’ desire to maintain a record of shareholder returns and confidence that weaker earnings may be temporary.

TotalEnergies Marketing Kenya increased its dividend 79.7 percent to Sh3.45 per share after profit rose 45.6 percent, while BAT Kenya raised its full-year dividend by 40 percent to Sh70 after profit increased 17.1 percent. EABL lifted its dividend by 59 percent to Sh12.70 after net profit rose 49.4 percent.

Kapchorua Tea increased its dividend per share to Sh30 from Sh25 after net profit rose 8.7 percent to Sh196.9 million in the year ended March 2026, taking the total payout to Sh469.4 million.

Williamson Tea returned to a net profit of Sh120.8 million from a Sh166.4 million loss and raised its dividend to Sh15 from Sh10, resulting in a total payout of Sh525.3 million.

Centum increased its dividend 2.5 times to Sh0.78, comprising Sh0.42 ordinary and Sh0.36 special payout, despite an 8.5 percent decline in net profit to Sh743.9 million for the year ended March 2026.

Mr Musau said firms such as Centum now have more room to increase dividends at a faster pace than profits as they emerge from a period of highly leveraged balance sheets. Centum completed a multi-year balance sheet restructuring that left the company debt-free.

“Firms such as Centum have paid down a lot of their debts now. They are seeing they want to reward the shareholders after a period of drought,” said Mr Musau.

Banks have added to the trend, with many growing dividends at a faster pace than their profits.

NCBA raised its full-year 2025 dividend by 29.1 percent to Sh7.10 per share, against seven percent profit growth to Sh23.4 billion. Its 2026 interim dividend rose 50 percent to Sh3.75 as first-half profit increased 12.2 percent.

KCB increased its dividend per share by 133 percent to Sh7 in 2025, partly reflecting the sale of National Bank of Kenya, against 11 percent profit growth to Sh68.4 billion. Its interim dividend rose 50 percent to Sh3 in the half year after profit grew 14.2 percent.

DTB and Co-operative Bank also raised dividends faster than profits in 2025, with payouts rising 28.6 percent and 66.7 percent against profit growth of 23 percent and 16.9 percent, respectively.

Other companies have opted to protect rather than increase dividends amid a decline in profits. For instance, TPS Eastern Africa, the operator of Serena Hotel, maintained its Sh0.35 payout despite a 40.2 percent profit decline to Sh787.2 million.

CIC Insurance held its dividend at Sh0.13 despite an 82 percent earnings collapse to Sh513.8 million, while Kenya Re maintained Sh0.15 after profit fell 11.6 percent to Sh3.92 billion. Liberty Kenya also retained its Sh0.50 payout despite a 65.3 percent profit decline to Sh487 million.

Reporting originally appeared via Business Daily. Read the full source for additional context.