{"id":3417,"date":"2023-06-12T19:49:33","date_gmt":"2023-06-12T19:49:33","guid":{"rendered":"https:\/\/candrgroup.co.ke\/?p=3417"},"modified":"2023-06-12T19:57:56","modified_gmt":"2023-06-12T19:57:56","slug":"should-you-reinvest-your-dividends","status":"publish","type":"post","link":"https:\/\/candrgroup.co.ke\/2023\/06\/12\/should-you-reinvest-your-dividends\/","title":{"rendered":"Should You Reinvest Your Dividends?"},"content":{"rendered":"\n
By Irene Mugua<\/strong>, Assistant Manager, Business Development<\/strong><\/em><\/p>\n\n\n\n <\/p>\n\n\n\n Dividends are known as one of the ways investors earn a return from investing in stocks. Dividends are regular payments of profit made to investors who own a company’s stock. Companies pay dividends to reward shareholders for their investments and continued support, and to investors dividend payouts are often seen as a sign of a company’s financial health and management’s confidence in future cash flow. Dividends can also communicate a positive message to investors who perceive a long-term dividend as a sign of corporate maturity and strength. Not all company however pay dividends but where companies do not pay dividends there is usually communications on the reasons so as to avert investor loss of confidence in the company.<\/p>\n\n\n\n Top tier banks in Kenya listed at the Nairobi Securities Exchange (NSE) announced commendable dividends from their 2022 financial results and shareholders of these public listed banks are expecting good returns on their investment, as we can see below: –<\/p>\n\n\n\n These payouts can be a good source of passive income, but there is more to these dividends than just cash in your pocket. When a shareholder elects to reinvest the dividends, the money from the dividend payment is used to purchase more shares in the same company. The process of reinvesting dividends is quite simple and an investor can opt to do this manually as part of their investment strategy.<\/p>\n\n\n\n Before we continue to the pros and cons of dividend reinvestment, here is an example of dividend reinvestment for ABSA Bank Kenya PLC for the last 5 years where an investor with a shareholding of 1,000 shares has been ploughing back the dividend payout to buy more shares. We have analyzed the value of shares over the 5-year time period with & without reinvesting the dividends paid for example purposes.<\/p>\n\n\n\nDIVIDEND YIELDS OF TOP TIER BANKS LISTED AT THE NAIROBI SECURITIES EXCHANGE (NSE) – 2022<\/strong><\/td><\/tr> COMPANY<\/strong><\/td> DIVIDEND PER SHARE<\/strong><\/td> CURRENT PRICE<\/strong><\/td> DIVIDEND YIELD<\/strong><\/td><\/tr> Standard Chartered Bank Kenya Ltd<\/td> 22.00<\/td> 142.00<\/td> 15.49%<\/td><\/tr> I&M Holdings Plc<\/td> 2.25<\/td> 16.90<\/td> 13.31%<\/td><\/tr> ABSA Bank Kenya Plc<\/td> 1.35<\/td> 10.50<\/td> 12.86%<\/td><\/tr> NCBA Group Plc<\/td> 4.25<\/td> 35.00<\/td> 12.14%<\/td><\/tr> Co-operative Bank of Kenya Ltd<\/td> 1.50<\/td> 12.75<\/td> 11.76%<\/td><\/tr> Stanbic Holdings Plc<\/td> 12.60<\/td> 117.75<\/td> 10.70%<\/td><\/tr> Diamond Trust Bank Kenya Ltd<\/td> 5.00<\/td> 52.25<\/td> 9.57%<\/td><\/tr> Equity Group Holdings Plc<\/td> 4.00<\/td> 44.95<\/td> 8.90%<\/td><\/tr> KCB Group Plc<\/td> 2.00<\/td> 31.20<\/td> 6.41%<\/td><\/tr><\/tbody><\/table> Dividend Reinvestment example, Company ABSA Bank Kenya PLC<\/strong><\/td><\/tr> <\/td> 2019<\/strong><\/td> 2020<\/strong><\/td> 2021<\/strong><\/td> 2022<\/strong><\/td> 2023<\/strong><\/td><\/tr> Number of Shares<\/td> 1000<\/td> 1093<\/td> 1211<\/td> 1211<\/td> 1318<\/td><\/tr> Stock Price<\/td> 11.8<\/td> 10.15<\/td> 8.82<\/td> 12.45<\/td> 12.8<\/td><\/tr> Dividend Per Share<\/td> 1.1<\/td> 1.1<\/td> 0<\/td> 1.1<\/td> 1.35<\/td><\/tr> New Shares from Dividend Reinvestment<\/td> 93<\/td> 118<\/td> 0<\/td> 107<\/td> 139<\/td><\/tr> Value of ABSA Shares- with Dividend Reinvestment<\/strong><\/td> 11,800.00<\/strong><\/td> 11,093.95<\/strong><\/td> 10,681.02<\/strong><\/td> 15,076.95<\/strong><\/td> 16,870.40<\/strong><\/td><\/tr> Value of ABSA Shares- without Dividend Reinvestment<\/strong><\/td> 11,800.00<\/strong><\/td> 10,150.00<\/strong><\/td> 8,820.00<\/strong><\/td> 12,450.00<\/strong><\/td> 12,800.00<\/strong><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n