Gulf Medical Projects Company (PJSC) (ADX:GMPC) Is Increasing Its Dividend To AED0.15

Gulf Medical Projects Company (PJSC) (ADX:GMPC) has announced that it will be increasing its periodic dividend on the 1st of January to AED0.15, which will be 50% higher than last year's comparable payment amount of AED0.10. This will take the dividend yield to an attractive 5.0%, providing a nice boost to shareholder returns.

See our latest analysis for Gulf Medical Projects Company (PJSC)

Estimates Indicate Gulf Medical Projects Company (PJSC)'s Could Struggle to Maintain Dividend Payments In The Future

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Over the next year, EPS could expand by 2.1% if the company continues along the path it has been on recently. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 141% over the next year.

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 AED0.0476 total annually to AED0.10. This works out to be a compound annual growth rate (CAGR) of approximately 7.7% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Gulf Medical Projects Company (PJSC) might have put its house in order since then, but we remain cautious.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been crawling upwards at 2.1% per year. The earnings growth is anaemic, and the company is paying out 108% of its profit. Limited recent earnings growth and a high payout ratio makes it hard for us to envision strong future dividend growth, unless the company should have substantial pricing power or some form of competitive advantage.

Gulf Medical Projects Company (PJSC)'s Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Gulf Medical Projects Company (PJSC)'s payments are rock solid. The track record isn't great, and the payments are a bit high to be considered sustainable. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Gulf Medical Projects Company (PJSC) you should be aware of, and 1 of them is concerning. Is Gulf Medical Projects Company (PJSC) 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.