ADNOC Drilling Company P.J.S.C (ADX:ADNOCDRILL) Is Increasing Its Dividend To $0.0905

ADNOC Drilling Company P.J.S.C.'s (ADX:ADNOCDRILL) dividend will be increasing from last year's payment of the same period to $0.0905 on 1st of January. This will take the dividend yield to an attractive 3.3%, providing a nice boost to shareholder returns.

Check out our latest analysis for ADNOC Drilling Company P.J.S.C

ADNOC Drilling Company P.J.S.C's Projections Indicate Future Payments May Be Unsustainable

A big dividend yield for a few years doesn't mean much if it can't be sustained. ADNOC Drilling Company P.J.S.C was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Over the next year, EPS is forecast to expand by 20.5%. If the dividend continues on its recent course, the payout ratio in 12 months could be 184%, which is a bit high and could start applying pressure to the balance sheet.

ADNOC Drilling Company P.J.S.C Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from an annual total of $0.0406 in 2022 to the most recent total annual payment of $0.0493. This means that it has been growing its distributions at 6.6% per annum over that time. ADNOC Drilling Company P.J.S.C has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that ADNOC Drilling Company P.J.S.C has grown earnings per share at 17% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

In Summary

Overall, we always like to see the dividend being raised, but we don't think ADNOC Drilling Company P.J.S.C will make a great income stock. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would be a touch cautious of relying on this stock primarily for the dividend income.

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 example, we've picked out 1 warning sign for ADNOC Drilling Company P.J.S.C that investors should know about before committing capital to this stock. Is ADNOC Drilling Company 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.