Kenya: BAT Pays Highest Dividend After 75 Percent Rise in Earnings

Source from:  Business Daily (Nairobi) 02/27/2012

Cigarette manufacturer British American Tobacco is set to pay the highest dividend among listed companies after it announced a 75 per cent rise in net profit for the year ended December 2011. The firm said Thursday that its net profit stood at Sh3 billion in 2011 compared to Sh1.76 billion posted the previous year on revenues of Sh20.1 billion, which reflected an increase of 48.8 per cent. BAT attributed the improved performance to increased sales in the export markets, especially semi-processed tobacco and the weakening of the Kenya shilling against the dollar--which lifted its revenues once the dollar dominated sales were converted to the local currency. Growth in earnings allowed the cigarette maker to declare a Sh30.50 dividend per share up from the Sh17.50 it paid last year, making it the most sought-after share among foreign and institutional investors. "The exchange rate benefit on export revenues also contributed to revenue growth. Total domestic and export volumes grew by 14 per cent over the previous year driven by higher contract manufacture volumes as well as good performance in the Kenya domestic markets," BAT Kenya said in a statement to the Nairobi Securities Exchange (NSE). Its export business accounts 62 per cent of its sales and it has been reaping from the sale of semi processed tobacco to countries such as Egypt that earned it Sh4.8 billion. This segment benefited from the currency woes that gripped East Africa's economies as the Kenya shilling weakened to a high of Sh107 to the dollar in mid-October compared to Sh80.70 in January 2010. On the domestic market, it also benefited from product price increments after the June budget that saw it increase the price of its flagship brand Sportsman, to Sh90 per packet from Sh70. Continued growth in sales of the Kenyan market signals that the firm has defied effects of the Tobacco Control Act 2007, which controls smoking in public places and banned tobacco advertisements. This has seen investors maintain an increased interest in the counter amid a bearish run at the NSE as the counter has shed 5.1 per cent over the past year to current price of Sh260. This has made it one of the few stocks to shed value by single digit, offering a double boost to its shareholders given the 74 per increase in dividend payout. The cigarette maker kept with past trends of paying its entire net profits to shareholders helped by cash rich operations that generated Sh5.3 billion in cash last year from Sh3.1 billion. This has made it the best dividend paying firm at the NSE so far based on the dividend yield --a financial ratio that shows how much a company pays out in dividends each year relative to its share price. BAT's yield stood at 11.7 per cent compared to Barclays Bank (11.45 per cent), Pan African (8.99 per cent), Housing Finance (8.54 per cent) and Bamburi Cement (7.69 per cent). In the absence of any capital gains, the dividend yield is the true measure of return on investment on a stock. "Investors buy into BAT Kenya for its stability and a track record of a high returns, which was once again the case this past year," said Eric Musau, an analyst of Standard Investment Bank. Enditem