Agthia Group PJSC (ADX:AGTHIA) Is Paying Out A Dividend Of AED0.0825

The board of Agthia Group PJSC (ADX:AGTHIA) has announced that it will pay a dividend on the 1st of January, with investors receiving AED0.0825 per share. This means the annual payment is 3.3% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Agthia Group PJSC

Agthia Group PJSC's Earnings Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Agthia Group PJSC's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 15.1%. If the dividend continues on this path, the payout ratio could be 45% by next year, which we think can be pretty sustainable going forward.

Agthia Group 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. The annual payment during the last 10 years was AED0.05 in 2012, and the most recent fiscal year payment was AED0.165. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year 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.

The Dividend's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. In the last five years, Agthia Group PJSC's earnings per share has shrunk at approximately 2.3% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

Our Thoughts On Agthia Group PJSC's Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Agthia Group PJSC that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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