A KSh2,175 dividend payment has sparked an important conversation among Kenyan retail investors about taxation, bank transaction fees and the often-overlooked cost of investing in the Nairobi Securities Exchange (NSE).

Investing in shares is often associated with capital appreciation and dividend income. However, while investors pay attention to share prices, company performance and dividend announcements, many overlook the charges that can reduce the money they eventually receive.

A recent example involving KCB Group illustrates why investors should pay closer attention to the cost of receiving dividends.

Understanding the KCB dividend example

KCB Group announced an interim dividend of KSh3 per share for 2026, payable to shareholders who were on the company’s register as of September 2, 2026. The dividend was scheduled for payment on November 10, 2026.

Consider an investor holding 725 KCB shares.

At KSh3 per share, the investor is entitled to a gross dividend of KSh2,175.

Here is how the payment works:

The investor starts with a gross dividend of KSh2,175 but ends up receiving KSh1,951.25 after the deductions illustrated above.

This represents a difference of KSh223.75 between the gross dividend and the amount ultimately received.

The important distinction is that the withholding tax is a statutory deduction, while the bank transaction charge is a cost associated with the payment channel.

Why is KRA deducting tax from dividends?

Dividend income is subject to withholding tax in Kenya.

For qualifying dividends paid to Kenyan resident individual shareholders, the applicable withholding tax rate is generally 5%.

This means that when a company distributes dividends, the tax is deducted before the shareholder receives the payment.

In the example above, KRA’s 5% deduction amounts to KSh108.75.

Unlike a bank transaction fee, this is a tax obligation rather than a charge imposed by the financial institution processing the payment.

The banking charges investors should understand

The second deduction raises an equally important question: why should an investor lose part of their dividend through a bank transfer charge?

Equity Bank’s published tariff guide lists an incoming EFT charge of KSh100. Applicable excise duty can increase the total cost.

In the example circulating among investors, the total charge is KSh115.

While this might appear relatively small, its impact becomes more noticeable when dealing with smaller dividend payments.

For an investor receiving KSh2,000, losing KSh115 represents a significant portion of the income earned.

This is why investors should understand their banks’ transaction tariffs and the payment options available to them.

Can investors receive dividends through M-PESA?

Yes. Investors do not necessarily have to receive their dividends through traditional bank transfers.

KCB shareholders can register their preferred dividend payment details, including mobile money options such as M-PESA and Airtel Money, through the company’s appointed share registrar, Image Registrars.

Shareholders can explore the available registration options through Image Registrars or contact the registrar directly.

Before changing payment preferences, investors should confirm whether their selected channel attracts any processing, receiving or withdrawal charges.

The objective should be to choose the most cost-effective payment method.

Five lessons every NSE investor should learn

1. Look beyond the gross dividend

A company’s dividend announcement tells you how much it intends to distribute per share. It does not necessarily tell you how much will land in your account.

Always consider applicable taxes and payment charges when calculating your expected returns.

2. Understand your bank’s tariff structure

Banking charges can gradually reduce investment income, particularly for investors with relatively small portfolios.

Understand the charges associated with incoming EFTs, withdrawals and other transactions.

3. Choose your dividend payment method carefully

If a company or its registrar offers multiple payment channels, compare their costs before selecting one.

A convenient payment method is not necessarily the cheapest.

4. Consider reinvesting your dividends

Rather than withdrawing and spending every dividend payment, investors can consider using their earnings to acquire additional shares or other suitable investments.

Reinvesting dividends can help grow an investment portfolio over time through the compounding effect, although returns are never guaranteed.

5. Do not chase dividends without examining the company

A high dividend payment does not automatically make a company a good investment.

Investors should examine profitability, cash flow, debt levels, earnings growth, dividend history and the sustainability of future distributions.

A company paying KSh5 per share is not automatically a better investment than one paying KSh2.

The bigger picture: Building wealth through the NSE

For Kenya’s growing community of retail investors, understanding investment costs is just as important as identifying profitable investment opportunities.

The objective of investing should not simply be to receive dividends. It should be to build a portfolio that can generate sustainable income and appreciate in value over the long term.

Small charges may appear insignificant individually, but consistently minimising unnecessary costs can help investors retain more of their investment returns.

Ultimately, successful investing requires more than buying shares and waiting for dividends. It requires understanding how money is invested, how returns are generated and how much of those returns investors actually get to keep.

The lesson is simple: Don’t just grow your investments. Learn how to protect the returns they generate.