Abu Dhabi Islamic Bank PJSC (ADX:ADIB) Is Increasing Its Dividend To AED0.4899

The board of Abu Dhabi Islamic Bank PJSC (ADX:ADIB) has announced that it will be paying its dividend of AED0.4899 on the 1st of January, an increased payment from last year's comparable dividend. This makes the dividend yield 5.2%, which is above the industry average.

See our latest analysis for Abu Dhabi Islamic Bank PJSC

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

If the payments aren't sustainable, a high yield for a few years won't matter that much.

Abu Dhabi Islamic Bank PJSC has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Based on Abu Dhabi Islamic Bank PJSC's last earnings report, the payout ratio is at a decent 54%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to expand by 15.9%. Analysts estimate the future payout ratio will be 56% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the dividend has gone from AED0.193 total annually to AED0.49. This implies that the company grew its distributions at a yearly rate of about 9.8% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Abu Dhabi Islamic Bank PJSC Could Grow Its Dividend

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. We are encouraged to see that Abu Dhabi Islamic Bank PJSC has grown earnings per share at 7.9% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Abu Dhabi Islamic Bank PJSC has 2 warning signs (and 1 which is concerning) we think you should know about. Is Abu Dhabi Islamic Bank PJSC not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.