National Bank of Fujairah PJSC's (ADX:NBF) Dividend Will Be Increased To AED0.15

National Bank of Fujairah PJSC (ADX:NBF) will increase its dividend from last year's comparable payment on the 1st of January to AED0.15. Despite this raise, the dividend yield of 3.5% is only a modest boost to shareholder returns.

See our latest analysis for National Bank of Fujairah PJSC

National Bank of Fujairah PJSC's Earnings Will Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end.

Having distributed dividends for at least 10 years, National Bank of Fujairah PJSC has a long history of paying out a part of its earnings to shareholders. Based on National Bank of Fujairah PJSC'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.

Looking forward, earnings per share could rise by 5.1% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the future payout ratio will be 53%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was AED0.0415 in 2015, and the most recent fiscal year payment was AED0.15. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

We Could See National Bank of Fujairah PJSC's Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that National Bank of Fujairah PJSC has grown earnings per share at 5.1% 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.

An additional note is that the company has been raising capital by issuing stock equal to 16% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Our Thoughts On National Bank of Fujairah PJSC's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for National Bank of Fujairah PJSC that you should be aware of before investing. Is National Bank of Fujairah 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.