Stock Analysis

Dubai Investments PJSC's (DFM:DIC) Dividend Will Be Increased To د.إ0.12

DFM:DIC
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Dubai Investments PJSC (DFM:DIC) will increase its dividend on the 1st of January to د.إ0.12. This makes the dividend yield 4.7%, which is above the industry average.

View our latest analysis for Dubai Investments PJSC

Dubai Investments PJSC's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before this announcement, Dubai Investments PJSC was paying out 82% of earnings, but a comparatively small 64% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Looking forward, could fall by 12.7% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 90%, which is definitely on the higher side.

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DFM:DIC Historic Dividend April 14th 2022

Dubai Investments PJSC Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2012, the dividend has gone from د.إ0.042 to د.إ0.12. This means that it has been growing its distributions at 11% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Dividend Growth Potential Is Shaky

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. Dubai Investments PJSC's EPS has fallen by approximately 13% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Our Thoughts On Dubai Investments PJSC's Dividend

Overall, we always like to see the dividend being raised, but we don't think Dubai Investments PJSC will make a great income stock. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We don't think Dubai Investments PJSC is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. See if management have their own wealth at stake, by checking insider shareholdings in Dubai Investments PJSC stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Valuation is complex, but we're helping make it simple.

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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.