Kenyan investors who opt to participate in the upcoming Airtel Uganda initial public offering (IPO) are set to enjoy a high cash return owing to the company’s policy of distributing nearly all of its net earnings as dividends.

Airtel Uganda is set to float 20 percent of its issued shares, equivalent to eight billion units, in the IPO to be held between the end of this month and early October.

The sale is designed to meet a regulatory requirement for Ugandan telcos to offload at least 20 percent of their ownership to locals, with the compliance deadline set to lapse in December.

Although the company says in a statement the sale will prioritise Ugandan investors, previous IPOs of a similar nature including that of MTN Uganda in 2021 were also opened to East African investors, with Kenyans taking part.

Airtel Uganda, in an investor presentation done a week ago ahead of the rollout of the IPO, said its dividend policy will be to pay out at least 95 percent of net or retained earnings, setting investors for regular cash returns.

“Airtel Uganda’s dividend policy will be to target a dividend pay-out ratio of 95 percent of retained earnings or net profit after tax, whichever is higher, on the basis of audited financial statements for the full financial year,” the company said in the presentation.

“On average, 95 percent of retained earnings has been distributed as a dividend each year, with an expected dividend paid of Ush514 billion (Sh19.9 billion) in the 2023 financial year.”

In the MTN Uganda IPO, a number of Kenyan investors took up stakes in the company, including the National Social Security Fund, the Central Bank of Kenya Pension Fund and billionaire investor Baloobhai Patel.

In the sale, MTN offered 4.47 billion shares in the Ugandan subsidiary at a price equivalent to Sh6.2 apiece, achieving a 64 percent subscription rate.

The IPO had no allocation quota but Ugandan investors were to be given priority in case of oversubscription.