R.A.K. Ceramics P.J.S.C (ADX:RAKCEC) Is Paying Out A Dividend Of AED0.10

The board of R.A.K. Ceramics P.J.S.C. (ADX:RAKCEC) has announced that it will pay a dividend on the 1st of January, with investors receiving AED0.10 per share. This means the annual payment is 8.5% of the current stock price, which is above the average for the industry.

Check out our latest analysis for R.A.K. Ceramics P.J.S.C

R.A.K. Ceramics P.J.S.C's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, R.A.K. Ceramics P.J.S.C was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 4.2% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 75% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was AED0.112, compared to the most recent full-year payment of AED0.20. This works out to be a compound annual growth rate (CAGR) of approximately 6.0% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Has Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. R.A.K. Ceramics P.J.S.C has impressed us by growing EPS at 8.3% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

R.A.K. Ceramics P.J.S.C Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think R.A.K. Ceramics P.J.S.C might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for R.A.K. Ceramics P.J.S.C that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.