First Abu Dhabi Bank P.J.S.C (ADX:FAB) Is Increasing Its Dividend To AED0.75

First Abu Dhabi Bank P.J.S.C. (ADX:FAB) will increase its dividend from last year's comparable payment on the 1st of January to AED0.75. Based on this payment, the dividend yield for the company will be 5.3%, which is fairly typical for the industry.

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

First Abu Dhabi Bank P.J.S.C's Payment Expected To Have Solid Earnings Coverage

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

First Abu Dhabi Bank P.J.S.C has established itself as a dividend paying company, given its 7-year history of distributing earnings to shareholders. Based on First Abu Dhabi Bank P.J.S.C's last earnings report, the payout ratio is at a decent 51%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next 3 years are set to see EPS grow by 8.3%. Analysts forecast the future payout ratio could be 51% over the same time horizon, which is a number we think the company can maintain.

First Abu Dhabi Bank P.J.S.C's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2018, the annual payment back then was AED0.692, compared to the most recent full-year payment of AED0.75. This means that it has been growing its distributions at 1.2% per annum 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.

First Abu Dhabi Bank P.J.S.C 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. First Abu Dhabi Bank P.J.S.C has seen EPS rising for the last five years, at 6.4% per annum. 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.

Our Thoughts On First Abu Dhabi Bank P.J.S.C's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for First Abu Dhabi Bank P.J.S.C that investors should take into consideration. Is First Abu Dhabi Bank P.J.S.C not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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