Don't Race Out To Buy First Abu Dhabi Bank P.J.S.C. (ADX:FAB) Just Because It's Going Ex-Dividend

It looks like First Abu Dhabi Bank P.J.S.C. (ADX:FAB) is about to go ex-dividend in the next three days. You will need to purchase shares before the 9th of March to receive the dividend, which will be paid on the 27th of March.

First Abu Dhabi Bank P.J.S.C's next dividend payment will be د.إ0.74 per share, on the back of last year when the company paid a total of د.إ0.74 to shareholders. Calculating the last year's worth of payments shows that First Abu Dhabi Bank P.J.S.C has a trailing yield of 5.0% on the current share price of AED14.92. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for First Abu Dhabi Bank P.J.S.C

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Its dividend payout ratio is 80% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in earnings.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. First Abu Dhabi Bank P.J.S.C's earnings per share have fallen at approximately 6.6% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. First Abu Dhabi Bank P.J.S.C has delivered 1.9% dividend growth per year on average over the past three years.

To Sum It Up

From a dividend perspective, should investors buy or avoid First Abu Dhabi Bank P.J.S.C? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

Although, if you're still interested in First Abu Dhabi Bank P.J.S.C and want to know more, you'll find it very useful to know what risks this stock faces. For example - First Abu Dhabi Bank P.J.S.C has 1 warning sign we think you should be aware of.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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