Ordinary Shares Explained Simply in Kenya: What They Are, How They Work & Why They Matter
Ordinary Shares Explained Simply in Kenya: What They Are, How They Work & Why They Matter
Written by Postine Ngeli
Meta description: Ever wondered what an ordinary share really is? This simple Kenyan guide explains ordinary shares, examples, risks, dividends, and how beginners can invest on the NSE.
Ever wondered what an ordinary share really is?
You hear people say “I bought Safaricom shares” or “I invest in shares on the NSE”.
But here’s the uncomfortable truth:
Many Kenyans buy shares without fully understanding what they actually own, how they make money, or what risks they are taking.
If you’re a beginner, ordinary shares can sound complicated — or even intimidating. They don’t have to be.
This guide explains ordinary shares in simple language, using clear Kenyan examples, so you understand what you’re buying, why it matters, and how it fits into long-term investing.
TL;DR
- Ordinary shares mean ownership in a company
- You may earn dividends and capital gains
- You get voting rights
- Returns are not guaranteed
- Best suited for long-term investing in Kenya
What Is an Ordinary Share?
An ordinary share is a unit of ownership in a company.
When you buy one:
- You own part of the business
- You share in profits (if dividends are declared)
- You also share in losses
A Simple Kenyan Example
Think of a chama with 100 members contributing equally. Each member owns 1% of the group.
Ordinary shares work the same way — except the business is listed on the Nairobi Securities Exchange (NSE).
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Key Features of Ordinary Shares in Kenya
1. Ownership and Voting Rights
- Ordinary shareholders own part of the company
- They vote at Annual General Meetings (AGMs)
The more shares you own, the more voting power you have.
2. Dividends (Not Guaranteed)
Dividends depend on company profits and board decisions. Some years, no dividend is paid.
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3. Capital Growth (Where Wealth Is Built)
If the company grows, the share price rises. This is how patient investors build wealth over time.
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4. Risk: Ordinary Shareholders Are Last in Line
- Lenders are paid first
- Preference shareholders follow
- Ordinary shareholders are paid last
This makes ordinary shares risky — but potentially rewarding over the long term.
Ordinary Shares Explained Using Numbers
| Item | Amount |
|---|---|
| Company | XYZ Ltd |
| Share Price | Ksh 50 |
| Shares Bought | 1,000 |
| Total Investment | Ksh 50,000 |
| Scenario | Share Price | Value | Result |
|---|---|---|---|
| Company grows | Ksh 80 | Ksh 80,000 | +Ksh 30,000 |
| Company struggles | Ksh 30 | Ksh 30,000 | −Ksh 20,000 |
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Expert Lens: How Professionals View Ordinary Shares
From a professional perspective, ordinary shares represent a residual claim on a company’s earnings and assets. Returns come from:
- Earnings growth
- Dividend policy discipline
- Market valuation over time
Risk is managed through diversification, long holding periods, and strong company fundamentals — not speculation.
Frequently Asked Questions About Ordinary Shares in Kenya
What is an ordinary share in simple terms?
An ordinary share represents ownership in a company. When you buy one, you become a part-owner and may earn dividends and capital gains.
Are ordinary shares safe in Kenya?
Ordinary shares carry risk because prices rise and fall. When held long-term and diversified, they can help build wealth.
Do ordinary shares pay dividends?
Yes, but dividends are not guaranteed. Companies only pay dividends when they make profits.
What is the difference between ordinary and preference shares?
Ordinary shares offer voting rights and growth potential, while preference shares usually offer fixed dividends.
How much money do I need to buy ordinary shares in Kenya?
You can start with the price of one share plus brokerage fees. Some NSE shares cost less than Ksh 50.
Conclusion
Ordinary shares are not gambling tools. They are ownership instruments.
When you buy ordinary shares, you become a part-owner of a business. Over time, disciplined investors benefit from growth, dividends, and compounding.
The key is knowledge, patience, and consistency.
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Disclaimer
This article is for educational purposes only and does not constitute financial advice. Always do your own research or consult a licensed financial advisor before investing.
About the Author
Postine Ngeli is the founder of Money Market Hub Kenya, a platform dedicated to simplifying shares, money market funds, and investing concepts for Kenyan beginners.
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