Safaricom is the leading telecommunications company in Kenya. The company provides mobile phone services including, voice, SMS, data, and M-Pesa among other telecommunication services. Safaricom is a public liability company with its ownership structure comprising of:
-Government of Kenya 35%
-Free float 25%: This is the amount held by the public available at the market and the amount you will get a share of when you buy shares.
The Share Performance
Safaricom floated its shares at the Nairobi Stock exchange through an Initial Public Offer (IPO) in March 2008 at the initial price of Kshs. 5 per share.
The share maintained its initial price when it started trading at the NSE oscillating between Kshs. 5 and Ksh.7 in 2008, but dipped to lows of Kshs. 3 in 2009.
On August 27, 2021, the Safaricom share was trading at Kshs. 44.90 per share as at close of business.
The rate of dividends has been on a rising trend since its inception. The first declared dividends were in 2009 at 0.10% per share and Safaricom has been declaring dividends every year ever since.
The highest ever dividends were declared this year on August 13th at 1.70% per share. The same is payable on September 16, 2021.
With the above background, you can make an informed decision in your quest of owning a part of the most profitable company in Africa.
So much about the history of Safaricom, time for trading.
Ways of Owning Safaricom Shares
Safaricom is a publicly listed company at the Nairobi Stock Exchange (NSE), and is clustered under the sector of Telecommunications, and is designated SCOM. NSE is the platform through which all the listed companies trade their shares.
You can own Safaricom shares by purchasing through an NSE licensed stockbroker or a financial institution. The process is very easy now that you have researched and decided to invest in Safaricom.
Employees of Safaricom can also own shares through Employee Share Ownership Programs (ESOP). This is an incentive with some available only to employees of Safaricom.
How to Buy Safaricom Shares
Do you want part ownership of the most profitable company in Kenya? Here are your first steps to becoming a shareholder of Safaricom. First, you need to have a CDS account, which is a must-have requirement to buy or sell shares. You can skip this step if you already have one.
Step 1: Opening a CDS account.
A CDS account is an account for storing your shares just like a bank account. The account facilitates your future buying and selling of shares. You can visit your local bank’s branch or any of the licensed CDSC agents or stockbrokers. Remember that it is free to open a CDS account and it is possible to get an account as an individual, joint account, partnership, group or Chama, SACCO, or as a company. To open a CDS account, you need:
-Your ID card
-Two passport-size photographs
-A CDSC 1 form is provided by your agent or bank. The form carries all your information including name, address, whether you are an individual or company, and most importantly your preferred mode of receiving dividends and the account number. Please note that Safaricom pays its dividends through M-Pesa.
Additional requirements for a limited company:
Articles and Memorandum of Association
Resolution to open a CDS account
Details of all the directors
Step 2: Account Generation
Upon providing all the requirements, your details are verified and an account is generated. This becomes your account through which you will buy, store, and sell Safaricom shares. This account is universally accepted and accessed by any bank or broker.
Step 2: Identify a stockbroker
You don’t have to go to the Nairobi Stock Exchange to get your shares!
NSE recommends the use of stockbrokers or bank custodial services in buying and selling shares. Furthermore, you can go through their list of approved stockbrokers on the NSE website.
Step 3: Funding Your Account
With an account and a broker, you need to pool together your resources in readiness to purchase the SCOM share as it is abbreviated in the trading circles.
Ensure to fund your account beforehand to ensure a smooth process. Bonga points are a reward given as a loyalty bonus for using Safaricom services such as voice, SMS, and data. Safaricom recently announced its partnership with CDSC/NSE to use Bonga points at the rate of five Bonga points for Ksh.1.
Step 4: Placing an Order
At his point, you know the price of Safaricom shares and the number of shares that you want to buy. You will have to visit a bank or your favorite stockbroker or an online broker approved by NSE. You can also buy online through the bank’s online portal or via an app without filling any forms. Remember, the bank and brokers earn a commission from the trade. You pay for their troubles 2.1% of the total value of transactions you made.
You will fill in a form purchase order form in duplicate and indicate the number of Safaricom shares and the amount. You can only buy shares on batches of 100 shares thus 100 shares is the minimum and the maximum depends on your pocket or bank account.
You will fill in the purchase order form together with a bank transfer form. You will be issued a duplicate purchase order and bank transfer form for your records. Once your details are verified, the money in your account is transferred to a suspense account and your order is placed at the NSE.
Here is an example, suppose you want to buy the minimum shares i.e. 100 shares. The Safaricom share is trading at Ksh. 44.90, so you will need 44.90×100= Kshs.4,990.
However, the broker will request you to raise the amount to around 45.50 or 46 per share. This is to cover you in case the price goes up during the execution of the order.
You may be asking what if the price falls below the day’s price? The answer is, it is your money and the excess will be refunded to your account. Similarly, if the order fails to be executed for whatever reason, you will be refunded.
The advantage of staking higher is to ensure that your order is completed. If the price goes higher than the amount you raised, your order will lapse after two days and you will have to start the process all over again.
Important to note: The broker or bank will not buy more or lesser quantities than the ones you indicated in the purchase order.
Step 5: You got Shares!
On successful purchase, your Safaricom shares are credited into your CDS account. The bank can generate a printout for you showing the date and number of shares that you bought. Alternatively, you can download a CDSC Mobile app and monitor your portfolio. If you want to add more, then you fill a purchase order and fund the account.
Step 6: Relax, wait, and Monitor
You are now a shareholder of Safaricom! And you are entitled to earn dividends every year. You can influence the future of Safaricom through your vote and what’s more, you can participate in the AGM meetings. A statement of the affairs of the company will also be mailed to you every year together with your AGM invitation.
Aside from the above, there is nothing much you can do except monitor the performance of Safaricom. Every news item mentioning Safaricom should always excite your interest. You have a stake to protect. Here is where patience rules.
If your main motivation in buying the Safaricom share was for trading, then your interest would be in the share performance, but if you were investing for long-term gains then you would be interested in the performance of Safaricom as a whole including its structural organization.
Furthermore, you will be getting statements from CDSC through email. For convenience, download the CDSC app.
Step 7: Investing
Meanwhile, while holding Safaricom shares what next? You have plenty of options for using the Safaricom shares. One, you can hold for long-term and wait for the price to go up while enjoying dividends. Here, you wait, hoping that it continues its bullish ways and be able to sell at a much higher price. This is investing.
Second, you can hold it as a store of value while also seeking to capitalize on its potential profits and dividends. In this case, you may be having excess finds that you want to diversify rather than leaving all your money in one basket.
Third, you want the ownership rights and control of the most profitable company in Africa. If your own more shares then you will wield more influence and control in Safaricom.
Fourth, you can use Safaricom shares as security for a loan facility at a bank. A share of a reputable company like Safaricom is hot cake and you will get a better bargain in terms of LTV (Loan to Value). When you use the shares as a loan facility, you sign a pledge form CDSC 5 and the shares are frozen. You cannot deal with them until the bank releases through CDSC 6, that’s of course after clearing the loan.
Finally, you can trade on them. Here, you are buying for sale while capitalizing on short-term gains. In this scenario, you are always on the lookout and constantly monitoring any price movements. This point paves the way to the next stage of the sale of shares.
How to Sell Safaricom Shares
You can sell Safaricom shares at any time you want at prevailing market rates. When markets are favorable or a need has arisen that needs your urgent attention or any other reason, you can easily sell and receive money instantly.
Selling Safaricom shares is easy, now that you have a CDS account. Here are the steps to follow:
Step 1: Check the Current Price of Safaricom share
If you had bought to profit from, you may want to sell at a higher price than the buying price. But if the current prices are lower then it is not the best time to sell, unless you have an emergency.
The time to sell is now given its bullish tendencies witnessed recently but if you foresee a further rise in prices, then you can wait.
Step 2: Fill a Sale Order Form
Pay a visit to your bank or broker and indicate your prices in consideration of the current market value of the share. There is no ceiling as to the minimum and a maximum number of shares to sell. You don’t have to sell all your shares at a go.
For example: when selling your shares, it is prudent to quote a lower value than the prevailing market rate. Its current price is Kshs. 44.90, so you may quote Kshs. 43.00 or 44.00.
After all, the broker will sell at the highest possible rate. The essence here is to cushion your order against bouncing should the price falls below your set price.
Important to note: Unlike purchase orders, a broker doesn’t have to execute the exact number you placed. The broker may sell in batches part of your Safaricom shares and may even credit back your orders after expiry. The share market like any other market operates on supply and demand principles.
Step 3: Your Account is Funded
In not more than two days your account is credited with the proceeds of Safaricom shares. A quick check into your portfolio will show you the balance less the amount sold. That marks the end of the process.
Your Final Take
Like in any investment, when investing in shares consider several factors such as market trends, internal and external influencers when investing. A prudent investor buys low and sells high.
Generally, Safaricom’s share outlook is bright and is expected to rise even further. With current dividends of Kshs 1.70 set to be disbursed on September 16, 2021, the shareholders are set to smile to the bank. It is paramount to constantly monitor the performance as you continue earning dividends.