Abu Dhabi Commercial Bank PJSC's (ADX:ADCB) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Abu Dhabi Commercial Bank PJSC (ADX:ADCB) has announced that it will be paying its dividend of AED0.59 on the 1st of January, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 5.0%.

See our latest analysis for Abu Dhabi Commercial Bank PJSC

Abu Dhabi Commercial Bank PJSC's Dividend Forecasted To Be Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Abu Dhabi Commercial Bank PJSC has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Abu Dhabi Commercial Bank PJSC's payout ratio of 49% is a good sign as this means that earnings decently cover dividends.

Over the next 3 years, EPS is forecast to expand by 17.0%. Analysts estimate the future payout ratio will be 46% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from AED0.38 total annually to AED0.59. This works out to be a compound annual growth rate (CAGR) of approximately 4.5% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Abu Dhabi Commercial Bank PJSC has impressed us by growing EPS at 12% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

We Really Like Abu Dhabi Commercial Bank PJSC's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Abu Dhabi Commercial Bank PJSC that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.