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Dividend payout spurs demand for Car & General stock

January 18, 2022

Car & General (C&G) shareholders have enjoyed a $6.53 million gain in paper wealth at the Nairobi Securities Exchange (NSE) on heavy demand for its shares amid limited supply following the announcement of a $0.02 per share dividend for the year ended September 2021.

The share closed at a six-and-a-half-year high of $0.43 on Wednesday, a gain of 60.8 percent from the $0.26 it traded at ahead of the release of its financial results last Thursday.

The company’s market capitalisation has now gone up to $15.77 million from $11.12 million a week ago, highlighting the allure of dividend payments in a market where capital gains have been stunted in the last few years.

It has gone up by the maximum of 10 percent in every trading session since the company told shareholders it was quadrupling its dividend from the $0.07 it paid for the year ended September 2020.

It is also giving its shareholders a bonus of one share for each that they hold, a rare occurrence by a listed firm combining a higher dividend payment with a bonus issuance.

Normally, firms issue bonus shares in lieu of a cash dividend payment, when they intend to conserve cash for capital needs. The enhanced dividend follows the firm tripling its net income to $7.77 million in the year ended September 2021, with revenue going up by 41.4 percent to $149.85 million.

Given the positive performance this year, the directors recommend a dividend of $1.12 million ($0.02 per share) in respect of the year,” the firm said in a statement “The directors further recommend the issuance of bonus shares of one new fully paid-up bonus share … for every one ordinary share to be issued to the shareholders registered on the company’s register at the close of business on March 24, 2022.”

One-for-one

Subject to approval of shareholders and regulators, the bonus shares will be credited on April 8. The bonus shares will, however, not be entitled to the new dividend. The issuance of a one-for-one bonus is also likely to drive demand for the stock ahead of book closure on the issuance on March 24, even though the bonus shares are not entitled to the $0.02 dividend.

The stock is, however, trading on thin volumes as only 2,100 shares changed hands in the past week, largely due to reluctance by those already holding the stock to let go and in turn miss out on the dividend and bonus payment.

Analysts also said the reluctance to sell may be on the presumption that the share price could still appreciate further nearer the February 25 and March 24 book closure dates on the dividend and bonus shares respectively.

theeastafrican



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