Ngunjiri,
Several commercial banks are dishing out 'unsecured' loans to their customers to buy the Safaricom IPO.Equity financed her clients during the Kengen IPO. i am wondering, are these commercial banks allowed to sell the shares bought by their clients should the clients default in paying interest on loans? if they are allowed to do so,then i think they are pulling a fast one on us coz they will end up having a very big chunk of Safaricom;which is good for the market anyway.

Apparently divinded pay out is a critical decision factor in portfolios requiring revenue stream. A certain healthy balance of revenue (read divs) and capital appreciation (read share value)are important and materially affect the pricing of the share in the market. Yes divs are a subset of Earnings and we are together on this in regard to Share value. However, share value is only one ot the elements that make the share price. Share pricing is a result of market forces which are affected by many factors among them divinded policy.
Markets are known world over to punish non divinded distribution and reward those with a less stingy divinded policy all other factors being constant. The reasons for this are onother subject.

there are those who argue that Dividends are paid out at the expense of company growth(save for firms that have reached maturity stage), they further argue that payments of dividends is like Liquidating one's future earnings potential...

The question here is To pay or not to pay dividend?
my take is that it all depends with the objectives of the investor. There are those who will go for those stocks with high dividend payout( regular income stream) while others will prefer a high Retention/low payout 'to grow' the company and especially if this investors are in the high tax brackets.

Though not an expert in this area, i do believe payment of dividend is a value decreasing activity. For once, investors can pay themselves dividend any time they so wish. How? By liquidating some of their shareholdings which is even cheaper as there are no taxes involved. My argument may be unorthodox but that is the way i look at it. I believe payment of dividend signifies managements' inability to create more wealth through re-investment. The sole reason that investors "donate" their money to the management is so that it can be grown. The distribution of that growth should be left to the individual investor to decide not the management. Why waste so much time as the management making decisions of how to distribute the earnings? I thought the primary role of the management should be how to generate the wealth not how to distribute it.Or is it not?

Anyway, mine is a kienyeji way of looking at it.

quote:

Though not an expert in this area, i do believe payment of dividend is a value decreasing activity. For once, investors can pay themselves dividend any time they so wish. How? By liquidating some of their shareholdings which is even cheaper as there are no taxes involved. My argument may be unorthodox but that is the way i look at it. I believe payment of dividend signifies managements' inability to create more wealth through re-investment. The sole reason that investors "donate" their money to the management is so that it can be grown. The distribution of that growth should be left to the individual investor to decide not the management. Why waste so much time as the management making decisions of how to distribute the earnings? I thought the primary role of the management should be how to generate the wealth not how to distribute it.Or is it not?

Anyway, mine is a kienyeji way of looking at it.

Couldn't agree more

Paka, Wakihia

this is not a kienyenji view both of you are quite knowlegeable on this. I am not an expert but have a more than casual interest in the markets. The very reasons you mentioned i.e "Home made Divs" and capital gains (re investment) are the very reasons that cause some financial analysts to feel that divindend policy is irrevant as a share price determinant.
I do concur with you on management duty to create wealth, i may put it in another way that the ONLY job of management is to maximise the investors wealth. Having agreed on this principal objective of management, could we look at the "wealth" being maximised. Does increase in the assets of the company (through retained profit) represent a proportionate increase in the value of shares and therefore the shareholders wealth? My answer would be no because though the market takes cognizance of the intrisic value of a share that value is not the only price determinant. The price is determined on the market floor and it is this price(so determined) multiplied by the No. of shares held that equals the shareholders wealth, the management's Job can further be norrowed down to "maximising the market price of the share"

Divindend pay out is one of the tools they use to shore up prices by exciting demand. I think it all boils down to perceptions.

This is not exciting, i think Safaricom is more exciting and right here. A friend mentioned that it may be the time to acquire blue chip shares as people sell off to acquire Safaricom, but it turns out the banks are the ones financing. Is any one watching?

The site under may be interesting


http://www.investopedia.com/articles/stocks/07/dividend.asp

Sorry i could not paste Link

quote:

Originally posted by Muhuthia:
The site under may be interesting


http://www.investopedia.com/articles/stocks/07/dividend.asp

Sorry i could not paste Link

Thanks Muhuthia for that link

Muhuthia,

Good. I like such links if only to reinforce my point and remove some of the "fallacies" inherent in that article. I do agree with the opening statement that investors prefer companies that pay steady dividends cause they represent mature and stable companies. That is as far as the party goes. MATURE means something that cant grow more than it is. That is all the more reason that such comapanies opt to pay dividends rather than re-invest. I do know people may argue that such companies have easier access to both public and private company but that is not strong enough to dispute the observation.

I will revert after analysing the article in detail.

quote:

MATURE means something that cant grow more than it is. That is all the more reason that such comapanies opt to pay dividends rather than re-invest.

The paradox of the company that has ran out of investment ideas yet makes profit is about to unfold.

Finally the offer has closed. We now hold breath waiting for our allocations, any curreny speculators out there? This is the time to buy USD

....preliminary reports show a performance of 382% with the domestic pool pumping in 115 billion.

Watch the other counters!

Thanks for this piece of info.
This is an excellent performance. The Tanzanians were denied participation by their archaic forex regulations. They are soo nationalistic these blasted guys insisting on cross listing. My brothers invest, invest, invest for posterity.

Please keep us posted

If you see red eyed people with tears flowing from their eyes, know it, they are ordinary mwananchi 'Safaricom investors'.
Those in mumbling incoherently and appear dazed are those who took loans to buy the shares. The pain continues.

Muhuthia the pain continues with the unspeakable demands for getting our money back.Still wondering whethee the investment was worth it!!Pain aint ceasing soon.....

quote:

Originally posted by Muhuthia:
If you see red eyed people with tears flowing from their eyes, know it, they are ordinary mwananchi 'Safaricom investors'.
Those in mumbling incoherently and appear dazed are those who took loans to buy the shares. The pain continues.