ADNOC Gas' (ADX:ADNOCGAS) Shareholders Will Receive A Bigger Dividend Than Last Year

ADNOC Gas PLC (ADX:ADNOCGAS) will increase its dividend from last year's comparable payment on the 3rd of September to $0.0857. Even though the dividend went up, the yield is still quite low at only 5.1%.

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ADNOC Gas' Future Dividends May Potentially Be At Risk

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, ADNOC Gas' dividend was only 64% of earnings, however it was paying out 119% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

EPS is set to fall by 13.1% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could reach over 200%, which could put the dividend in jeopardy if the company's earnings don't improve.

See our latest analysis for ADNOC Gas

ADNOC Gas Doesn't Have A Long Payment History

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2023, the dividend has gone from $0.0423 total annually to $0.0467. This works out to be a compound annual growth rate (CAGR) of approximately 5.0% a year over that time. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.

ADNOC Gas Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. ADNOC Gas has seen EPS rising for the last five years, at 8.0% per annum. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

Our Thoughts On ADNOC Gas' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While ADNOC Gas is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for ADNOC Gas that investors need to be conscious of moving forward. 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.