Understanding the Stock Market: Quick Thoughts on Umeme’s Dividend Payout

 

 So today Umeme announced an interim dividend of Ushs 222 per ordinary share.

Some “keyboard warriors” are already busy doing the Lord’s work, dismissing it as insignificant, and referring to the stock market as a scam.

“Imagine you own 100 shares, and you get just 22,200,” they're posting

First of all, how much were you expecting to earn?🫣  Do we really know how this dividend thing works?

Granted 22,000 is not a lot of money by any stretch of  the imagination.

But total return from the stock market isn’t just the dividend, it's also how much your shares are worth now compared to when you bought them.

Think of investing in shares like planting a tree:

• The dividend is like fruit you get every season.
• The share price is the value of the tree itself: over time, it can grow, making your whole investment more valuable.

The total value of your investment includes:

1. Dividends received over time
2. Capital gains (the increase in the share price since you bought it)
3. Compounding, if you reinvest those dividends to buy more shares

 

Here is an example:

Let’s say you bought 1,000 Umeme shares at UGX 300 per share = UGX 300,000 total investment.

Umeme’s share price grows to UGX 380 over the course of one year. Your shares are now worth:

• 1,000 × 380 = UGX 380,000 → That’s a capital gain of UGX 80,000

If Umeme pays UGX 222 per share in dividends, you get:

• 1,000 × 222 = UGX 222,000

So, your total return is:

• Capital gain: UGX 80,000
• Dividend income: UGX 222,000
• Total gain: UGX 302,000

And that is on top of your original investment.

 

The stock market is not a get-rich-quick scheme. It’s a long-term game. You don’t buy 100 shares and expect life-changing returns overnight.

 When you buy shares in Umeme or any other company don’t just sit back and expect your money to multiply as if by magic!

You have to put in some work and grow your investment:

• Build your portfolio over time. That means you don’t invest once. You keep investing.
• Reinvest dividend. Don’t be in a hurry to “eat” the miserable” 22k dividend. Re-invest in and grow it
• Growth happens over time; so hold on to stocks for the long haul

 

Dividends are just part of the picture.

 If you judge an investment only by the dividend, you’re missing out on the bigger story i.e. how your money grows over time!

 

By Martha Songa

miss.songa@gmail.com