Dubai Financial Market P.J.S.C (DFM:DFM) Is Paying Out Less In Dividends Than Last Year

Dubai Financial Market P.J.S.C.'s (DFM:DFM) dividend is being reduced from last year's payment covering the same period to AED0.032 on the 1st of January. The dividend yield will be in the average range for the industry at 2.7%.

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Dubai Financial Market P.J.S.C's Projected Earnings Seem Likely To Cover Future Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Dubai Financial Market P.J.S.C's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 27.4% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 48% by next year, which is in a pretty sustainable range.

See our latest analysis for Dubai Financial Market P.J.S.C

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from AED0.07 total annually to AED0.035. This works out to be a decline of approximately 6.7% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Dubai Financial Market P.J.S.C has impressed us by growing EPS at 26% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Dubai Financial Market P.J.S.C could prove to be a strong dividend payer.

We Really Like Dubai Financial Market P.J.S.C's Dividend

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that Dubai Financial Market P.J.S.C has the makings of a solid income stock moving forward. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Dubai Financial Market P.J.S.C stock. Is Dubai Financial Market 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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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.