Top 5 Best Shares to Buy in Kenya

Buying and selling shares is one of the best ways to invest in Kenya. The rise of the economy together with a good business environment is creating growth opportunities for the local companies. Hence, let’s look at the top 5 best shares to buy in Kenya.

The Nairobi securities exchange offers a platform for trading and listing companies. Currently, there are several companies listed with the NSE that you can invest in. You can also get other services from the exchange such as market performance and investment advice.

Buying shares is not a complicated process. Any Kenyan can participate as long you meet the set requirements. These include having a Kenyan bank account, a CDS account, and starting capital. Read more on How to buy and sell shares in Kenya.

Buying shares requires you to have a good market understanding to increase your chances of success. This is because such investment carries some risk that could result in losses if done blindly. Hence, it is necessary to endure you understand the market before buying shares.

Some of the key areas to consider while making a shares investment decision include;

Company leadership- Companies with competent leaders are more likely to perform better resulting in higher returns for investors. Some of the factors to check in leadership are education level and experience.

Nature of the products and services -A high-potential company supplies goods and services that are in demand or likely to become more valuable in the future

Past performance – Companies that have performed well in the past are most likely to perform well in the near future making their shares high potential to buy.

Political influence- Companies with a high level of political influence are riskier to invest in. This is because sometimes decisions are made from interests other than merit. Hence, you should stay away from buying such shares.

Benefits of buying shares

There are various benefits that you get from buying shares. These include

Dividends – Dividends are the periodic payouts made to shareholders. This mostly happens either semi-annually or annually. The amount of dividends you get depends on the number of shares and the company’s profitability.

Share price gain – The price of shares keeps changing depending on the market conditions. Good-performing companies tend to experience share price gain. In return, this increases your share value. Hence, focus to buy from companies that are highly likely to give you better gains.

Decision-making – As a shareholder, you become eligible to participate in the company’s decision-making. This happens through the annual general meeting where major decisions are made by the shareholders.

Challenges of buying shares

Exposure to losses-Just like most investments, investing in shares comes with a certain level of risk. That is the risk of losing your investments. It happens when you buy at a certain price and the share continues to fall instead of rising.

Hence, you need to invest money that you are willing to lose. It is also necessary to keep up with the changes in the market to avoid being caught unaware when the market falls. in such scenarios, the best approach is to exit the market and cut your losses.

Investment capital – There is a minimum number of shares that you can buy in the market. Depending on the share price, this could become a limiting factor to a majority of potential investors if the limit is above your ability.

Taxation – Some share transactions do attract tax resulting in income reduction. Some of these include dividends and when selling your shares. Hence, you need to do your calculation to ensure you don’t end up in losses after the sale.

Top 5 best shares to buy in Kenya

The below list contains some of the best shares to buy in the country. These companies have had a good past performance and are likely to maintain in the near future.

1.  Safaricom

Safaricom is the largest company in the country both in assets, profitability, and customer base. A position will likely maintain for a long time.

Some of the key reasons for this market leadership is the fact that it offers some relevant and competitive products in the market. The products span both the financial sector and the telecommunication sector.

The relevance of these products will likely see it continue with market dominance into the future making its shares among the high potential to invest in both for the short term and long term.

The company has also maintained dividends payout consistency increasing the returns for the shareholders. Perhaps the best returns so far have been on the share price gain. During its IPO, Safaricom’s share price was retailing at 5 shillings. Currently, it is trading at 30 shillings.

This represents a growth of over 600%. To make sense of this, if you invested 1 million during the IPO, your investment could be worth 6 million shillings today at the current market price.

Most analysts predict a continuation in growth as the company continues to expand its services. learn more about how to buy Safaricom shares in Kenya.

Finally, the recent decision by Safaricom to enter Ethiopia’s market is likely to speed up its growth. There are numerous opportunities in the market that has over 100 million people and little use of mobile money services.

2.  Equity bank

Equity bank ranks number two on this list of the top 5 best shares to buy in Kenya. Among the reasons for this is because it is the largest bank in Kenya in terms of both customer base and profitability. A position it has held for a while now.

The bank is also in an expansion drive across the region with the recent major venture being in the Democratic Republic of Congo.

Investors are optimistic that this expansion will result in increased earnings in the future. Such optimism in the market is a driver for share price growth. 

Another element that makes the banks share a high growth potential is the favorable government policies both in the country and the region. One of these is the recent removal of interest capping by the government.

Constant dividend payment also makes it attractive to buy the bank’s shares. As the profits grow, so is the returns. The share is currently trading at 48 shillings from a 2-year high of 54. Hence, there is still room to buy and hopefully ride on the upside.

3.  East Africa Breweries

East Africa Breweries (EABL) is the largest beer producer and seller in the country. This makes it dominant and thus enjoys high regular returns.

With Kenyans spending billions of dollars on beer consumption, the company continues to operate in a lucrative market that is highly profitable.

Beer consumption is among the products whose demand continues to grow. This means the company will continue operating in a high-demand market into the future.

EABL performance has been consistent in the last few years. Part of the reasons why it remains high on this list. The company also has stable local leadership and pays dividends regularly. As such, this is a high-potential company to buy shares from.

However, when investing in such a company, you need to keep keen on the regulations. This is because beer is not a necessity and hence the government may change the regulations regularly affecting business. Some of these include a change in taxation. A factor that could affect income.

4.  Kenya Commercial Bank (KCB)

Kenya Commercial bank is the second largest bank in the country both in asset base and profitability. This makes it a key investment potential as the bank’s performance continues to improve year after year.

The bank is also currently on an expansion drive within the region increasing the probability of future growth in returns.

These factors combined with regular dividend payments make investing in KCB shares a good option. The share price is currently trading at an average of 40 shillings making it affordable to the majority of Kenyans.

Its last high was 2 years ago when the share traded at 55 shillings. Hence you can buy at the current low with the expectation of at least 30% returns if it returns to the previous high.

Another factor supporting buying KCB shares is the favorable operating environment due to regulations that make it a safer industry to put your investments in.

5.  Co-operative bank

This is the third bank to join this list. As the third largest bank in the country, the cooperative bank continues to offer good returns for its investors both in terms of share price gain and dividends.

The bank has also had a very stable leadership with continuous growth in profitability. it also operates across the region making its portfolio well diverse.

Just like the rest, the bank continues to enjoy operations in a well-regulated environment ensuring predictability both for its customers and investors.

Take away on top 5 best shares to buy in Kenya

These companies offer good opportunities in the country’s share market for you as an investor. However, you need to understand there is a risk element to buying shares. Hence, focus to get adequate market knowledge and experience before putting your money in.

You can also use the services of professionals in the market for clarity and advice. In most cases, this comes at a cost.

Below is a recap of the top 5 best shares to buy in Kenya

1. Safaricom shares
2. Equity bank shares
3. East Africa Breweries shares
4. Kenya Commercial Bank shares
5. Co-operative bank shares