Safaricom's Sh80bn Dividend: Cash Cow or Warning Sign?

Safaricom declared a Sh80 billion dividend for the fiscal year ending March 2026, a 66.7% increase per share. That is real money. Shareholders who held through the 2021-2023 slump are finally getting paid. But this payout also raises a question: where is the growth going?

The company crossed Ksh 400 billion in revenue, per Capital Business. The dividend alone consumes 20% of that revenue. For a telecom operator facing heavy capex in fibre, 5G, and data centres, that is a lot of cash leaving the building.

The reinvestment risk

Safaricom's core voice and SMS revenue has been flat for years. The growth story is M-Pesa and data. But M-Pesa faces regulatory pressure on fees. The Communications Authority of Kenya has been pushing for lower mobile money costs. Data revenue is under attack from Airtel's aggressive pricing and Starlink's entry into the Kenyan market.

If Safaricom is paying out more in dividends, it likely means management sees fewer high-return investment opportunities. That could be because the low-hanging fruit is gone. M-Pesa is mature. The fintech pivot into lending and savings has been hit by bad debt and tighter Central Bank rules.

What investors should do

The dividend yield will be attractive if the share price stays where it is. But investors need to watch the payout ratio. If profit growth slows and the dividend stays high, Safaricom will either cut capex or take on debt. Neither is good for the stock long term.

Expect the share price to rally on the news. But the smart money will be watching the next quarterly results for signs of revenue deceleration. Safaricom is a cash cow, not a growth stock. This dividend confirms that.