British American Tobacco Kenya Ltd (BAT) shares are currently rallying at KES 414 compared to their opening price of KES 89 (approximately) in January 2008. The common stock’s value has increased almost 5 fold since our last general elections. Added to this, the company has been paying out dividends ranging from KES 3.50 – 27.00 per share and has rarely failed to make favorable dividend payments. Needless to say, while some were partaking in the geographical relocation of our precious rocks, investment savvy locals and foreigners took advantage of the share’s low price. It should come as no surprise that the organization is considered a blue chip company and a permanent resident of the NSE 20-share index. So how wise would it be for one to sell those shares now? Here’s one technique you can use.

Holding Period Return (HPR) refers to a method of determining the returns received from an asset for the period one has it in their possession. This method takes into account all the income you have received vis-à-vis shares and considers their capital growth (the increase in your share’s price). Let’s assume you have 1000 BAT shares. Here's the returns you're looking at.

[caption id="attachment_20530" align="aligncenter" width="574"] Image source: "FILE"[/caption]

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The total dividends for anyone who owned 1000 shares as of 2008 and is still holding them come to KES 73,750, an amount well over what you'd receive if you owned 1000 shares in most of the listed companies. As of yesterday when the stock traded at an average price of KES 414, you're looking at a value of KES 414,000. The total value since January 2008 now stands at KES 487,750, enough to buy you a Toyota vitz. The second graph illustrates the returns as a percentage of the price the share started at for the year. Much like the shares, it shows a general upward trend, meaning that you will get more value by holding onto the shares if this trend was to comtinue.

What the numbers mean: Patience pays. The market has rallied in favour of BAT since our last general elections and has seen a change in share price for the better. Despite increasing sin tax, the company has outperformed most organizations across all sectors and has contributed greatly to the government via tax payments. For the consumer, it means you stand to make more dividends as the true value of the company is realized by both local and foreign investors. Confidence in the Nairobi Securities Exchange is also key. The demutualization of the NSE will see trading become more aggressive and possibly attract foreigners. That might translate to greater share prices and even better gains for our currently dormant investors. Maybe holding onto those Safaricom shares beyond their recent jump to KES 4.10 will reap you greater benefits later. Maybe.