Voda investors to pocket Sh0.4tr special dividend

Dar es Salaam. Shareholders of Vodacom Tanzania will share a total of Sh400 billion during the coming weeks after the company decided to issue a special dividend.

A special dividend is defined as a non-recurring distribution of company assets, usually in the form of cash, to shareholders. It is usually larger compared to normal dividends paid out by the company and often tied to a specific event like an asset sale or other windfall event.

Vodacom Tanzania announced yesterday that it would issue a total of Sh400 billion until November 13, 2020 so as to improve capital allocation.

The amount translates into a dividend per share of Sh178.57 per share, according to the company’s statement issued yesterday at the Dar es Salaam Stock Exchange (DSE).

The highest normal dividend that Vodacom Tanzania Plc has ever paid to its shareholders currently stands at Sh54.454 billion which was paid out during the year that ended on March 31, 2019.

The Sh54.454 billion translated into a dividend per share of Sh24.31.

Prior to that one, Vodacom – which was listed on the Dar es Salaam Stock Exchange (DSE) on August 2017 - paid a total of Sh38.8 billion for the year ending March 2018.

Vodacom Tanzania Plc’s managing director, Hisham Hendi, told The Citizen yesterday that the special dividend was additional to the normal dividend of Sh27.5 billion, or Sh12.26 per share, which was earlier proposed for issuance in relation to the financial year ended March 31, 2020.

“The board of directors concluded that a special dividend was in the best interest of the shareholders to improve capital allocation,” he said.

Adding: “Vodacom Tanzania’s dividend policy accounts for the retention of funds to meet the requirements reflected in the company’s budget and business plan.”

Start date to trade shares cum dividend would be from September 21 to October 12, 2020.

Analysts say special dividend payout was normal for listed companies when the board of directors see that there was a need for shareholders to share the fortunes.

“Special dividends are paid from the reserved funds of the company, and are subjected to the approval of the Annual General Meeting (AGM),” the Orbit Securities Company Limited operations director, Mr Juventus Simon, told The Citizen.

The director of Arch Financial and Investment Advisory Limited, Mr Mazengo Kasilati, shared similar sentiments, saying special dividends were also a way for companies to demonstrate good faith to shareholders and for the rest of the market in order to avoid price movements and shocks.

According to the Zan Securities Limited chief executive officer Raphael Masumbuko said special dividends were usually reserved funds from the previous financial years and had no relation with the six months period for which the company predicts a slowdown in its profit level.

According to Mr Masumbuko for a big company like Vodacom which was the market leader in Tanzania’s telecommunication sector, it was possible for it to have enough liquidity to issue special dividends without being affected in any way.

Going by the latest TCRA’s quarterly communications statistics, by June this year Vodacom holds 30.6 percent market share with 14.7 million telecoms subscriptions among 48.1 million total subscriptions in the country.

However, the announcement of the special dividend came as the company is forecasting to post a decline of at least 25 percent in its six-month profit to September 30, 2020 compared to the profit recorded during the similar period last year.

The telecoms company said in the statement that the dwindling in profit for the six months was triggered by a number of factors.

“These include the impact from barring customers in accordance with the requirements of the Tanzania Communication Regulatory Authority, as well as the effects of the Covid-19 pandemic on the economy and our business,” Vodacom statement reads in part.

Earlier this year, Vodacom warned on profit dwindling after one-third of its customers had until February failed to register sim-card using biometric system.