Kenya Breweries made a 5 for 1 stock split late in 2004 to make their high-flying stock more affordable. Now, each time I have a 100/= beer as I watch sports or socialise, my inner selfish guide asks me why don’t I buy of their shares instead of the next round of beers?
Over the last four years, EABL’s share price has grown from 50 shillings to 600, and now trades at about 500 (actually 100 after the split). Whether this growth rate can be continued in future is questionable and risky. The company has fought and continues to face many battles – it ran Castle out of Kenya, and when underground liquors threatened its dominance, they contrived to have the government ban the sale of alcohol in sachets.
By 2008 the stock could go to 1,000 shillings or be down to 200, but it’s still a better return than the 0% return I get on Monday morning after drinking several 100/= beers. In addition, I’ll be assured of a healthy dividend each year as a good chunk of profit is repatriated abroad each year through dividends.