Shareholders of Safaricom will in future receive shares instead of cash as dividend, if the mobile phone service provider secures the necessary approval.
The Dividend Reinvestment Plan (Drip), which will be optional and a first in the country’s capital market, will cover most of the company’s shareholders with less than 1,000 shares.
Such shareholders, numbering 465,106 as at March 30, 2009, received less than Sh100 as dividend each, because the company paid a dividend of Sh0.10 per share less withholding tax.
“Reinvesting the dividend will be good for us instead of spending Sh45 to send a Sh100 dividend cheque. Shareholders will also have an investment that will benefit them in the long-term,” the company’s chief investor relations officer, Mr Les Baillie, said on Thursday.
Maintaining that it is common practice in the developed markets, he said the company would seek Capital Markets Authority (CMA)’s approval before asking shareholders to vote on it.
“If we get CMA’s approval before the next AGM, we will definitely ask the shareholders to look at it during the meeting,” Mr Baillie told a press briefing at a Nairobi hotel.
The move follows another first by the company last year when it paid dividend through its mobile money transfer-service, M-Pesa for over 180,000 shareholders who received Sh57.3 million.
The Drip, however, raises concerns that together with the proposed Employee Share Purchase Scheme, will entail issuing of new shares leading to an increase in the company’s shares.
The shares are already viewed as being too many in the market and are the reason behind a share consolidation plan, which is being reviewed by the company’s board of directors. But Mr Baillie downplayed the effect, saying it would not entail issuing too many shares since not all shareholders will opt for it.
A research analyst with Renaissance Capital, Mr Eric Musau, concurred noting that it was the value of the shares as opposed to their numbers or price that was critical to an investor.
“It is a positive move since it gives shareholders another option while giving the company easy access to capital for investment without the normal hassles associated with raising capital from the market,” he said.
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