Inflation slows as debt grows

The region opened another rainy week with Nairobi hosting the IDA 21 summit and although we don't have anything major to report from there, hippos and crocs roamed the flooding city. Inflation slowed down (whether you felt it or not), some listed companies continued to pay out decent dividends while the Treasury tried to solve their puzzling budget deficit.

Here are the main stories that caught my eyes and ears in the week:

• Kenya's wealthy betting on residential property
• StanChart leads banks with high dividend yield
• NSE market cap was up in Q1

If nothing seems particularly exciting in this issue, at least make it to the explainer and meet the AI avatar I teamed up with to teach you about dividend yield.

SPOTLIGHT

This is what 'inflation at a 2-year low' feels like

The Kenya National Bureau of Statistics (KNBS) acts as the principal agency of the Government for collecting, analysing and disseminating statistical data in Kenya. Every month they release inflation data.

What happened?

Kenya's inflation dropped to a record 24-month low in April to 5% from 5.7% in March, the latest data from the KNBS shows, as prices of key food commodities continued to fall.

Between the lines

The continued drop comes despite some price rises on some indices. Major contributors to April's year-on-year price rises included transport, food and non-alcoholic beverages, and housing, water, electricity, gas and other fuels.

Sentiment: Positive.

Should you care?

The drop comes after the Central Bank of Kenya (CBK) last month held the CBR at 13.0%, to allow inflation to continue declining to the desired level. The decision to hold the CBR steady followed rate hikes in December and February that were aimed at stabilising the exchange rate and helping stubborn inflation to start falling. If you missed last week's explainer, take a quick look to better see how these connect.

HEADLINES

The week's big stories

• Kenya's wealthy betting on residential property. The change in the office landscape has likely influenced high net worth individuals (HNWIs) to reevaluate the attractiveness of commercial real estate as a viable investment avenue. Data from Knight Frank’s Luxury Investment Index also emphasizes the growing prominence of art as the top-performing luxury asset class in 2023. Insightful.
• StanChart leads banks with high dividend yield. Standard Chartered’s dividend yield has grown to 17%. The bank’s share price has fallen by 12.8% to Sh170.25 as of Thursday, from Sh195.25 on April 19 when the bank’s books were closed for the payment of a final dividend of Sh23 per share. The company’s total dividend for the year stood at Sh29 per share. Useful for future consideration of high dividend stocks.
• NSE market cap was up in Q1. The Nairobi Securities Exchange (NSE) recorded a 22.79% increase in market cap to KSh 1,766.95 billion by the close of Q1 2024, up from KSh 1,439.02 billion in Q4 2023. CMA attributes this uptick to heightened trading activities, with the NSE equity turnover for Q1 2024 totaling KSh 19.07 billion, a substantial 61.56 percent increase from KSh 11.80 billion in Q4 2023. Strong positive signal for markets that have been depressed for an extended period.

INSIGHT

Explained by AI (and I): Dividend Yield

Dividend yield is a ratio that measures the annual dividend income generated by a stock relative to its current market price. It is calculated by dividing the annual dividend per share by the current market price per share, and then multiplying by 100 to express the result as a percentage. It is very important in equity investing.

Here's why it's important to you as an investor:

1. Income Generation: Dividend yield provides investors with a measure of the income they can expect to receive from owning a particular stock. Higher dividend yields indicate higher income potential, which can be attractive to income-focused investors seeking regular cash flow from their investments.

2. Comparison Tool: Dividend yield allows investors to compare the income-generating potential of different stocks within the same sector or across different industries. It helps investors assess which stocks offer the most attractive yield relative to their market price.

3. Stability and Quality: Companies that consistently pay dividends and have a history of increasing dividend payments tend to be financially stable and have strong cash flows. A consistently high dividend yield may signal that a company is financially healthy and has the ability to sustain its dividend payments over time.

4. Total Return: Dividend yield is a component of total return, which includes both capital appreciation (increase in stock price) and dividend income. For investors focused on long-term wealth accumulation, dividend yield can contribute significantly to overall returns and portfolio growth.

5. Inflation Hedge: Dividend-paying stocks have historically provided a hedge against inflation, as companies tend to increase their dividends over time to keep pace with inflationary pressures. This can help investors maintain the purchasing power of their income in an inflationary environment.

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Don’t just assess a dividend on absolute terms, but rather as yield in order to make informed investment decisions.

ICYMI

Quick takes

• Interest rates may stay high for a while. World Banks’s projection could already be evident in Kenya as the Central Bank of Kenya (CBK) in the latest review maintained its base lending rate at 13 per cent despite inflation retreating to 5.7 per cent as of March. Kenya remains exposed to geo-political risks posed by Middle East conflict.
• Total raises dividend on increased earnings. TotalEnergies Marketing Kenya has raised its dividend payout by 46.5% to Sh1.92 per share totaling Sh336.1mn on increased earnings for the financial year ended Dec 2023. The proposed dividend is a rise from Sh1.31 per share the oil marketer paid last year. Positive result for shareholders.
• The burden of public debt on you is growing. Interest payments on public debts will cost taxpayers Sh5 trn over the next 5 years, new data by the Treasury shows. The Sh5trn is the cost taxpayers have to pay lenders for loans the government has spent on projects and non-development activities. Ouch.

One liners

• CBK Seeks KSh 25Bn in 10yr T-Bond Sale [Kenyan Wall Street]
• Kenyan retailers ready to pounce as Ethiopia to open up market [The Standard]
• Treasury faces headache over Sh718b budget deficit [People Daily]
• Foreigners break NSE selling spree with Sh1bn April inflows [Business Daily]

REGION

What in the East Africa?

[UG] XENO doubles asset management to Shs 60bn within a year: At the AGM chaired by Rosemary Nantambi, it was revealed that the investment firm has crossed 100,000 registered investment accounts, majority of which are in Uganda. [Story]

[UG] BoU to auction 15 year treasury bond: On May 15, 2024, the Bank of Uganda will be auctioning a 15 year treasury bond with a 16% coupon rate & an expected yield of around 15.8%. [Story]

[TZ] DSE sees surge in local investor activity: Local lender CRDB Bank Plc emerged as the top trading counter in the equities market during the first quarter of 2024, contributing over 54 percent of the total turnover. [Story]

[TZ] Stock trading via mobile app balloons eight times: The bourse data showed that transactions through ‘Hisa Kiganjani App’ increased notably to 2.72bn/- in three months to March against 326m/- in a similar period last year. The app success story compelled DSE to think about how to extend the service to the Diaspora, to ease the buying and selling of shares from abroad.[Story]

[RW] BK Capital raises MTN Rwanda stock target by 48%: BK Capital has initiated coverage of MTN Rwandacell Plc with a price target of Rwf250, from the current Rwf170 per share at which its stock is trading at on the Rwanda Stock Exchange (RSE), while affirming its Buy rating on the stock. [Story]

CURIOUS

Two good not to share

One: I follow the NBA a little bit, and I love the guitar very much. So when YouTube suggested this video...yeah. If you have plans on picking up an instrument anytime soon, here's an example of what you didn't know a guitar could do! His name is Marcin, and he is a Polish percussive fingerstyle guitarist.

Two: I also follow this Richard Feynman tribute account on X and it almost always has thoughts worth sharing.

That's it from me for this week. If you enjoyed this edition, please share with someone who you think might benefit from it. You can also read last week's here if you missed it (we had trouble with emails unrelated to the floods). Good luck with the week ahead. Look out for inflation and have the best week possible.

Yours truly.

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