Al Wathba National Insurance Company PJSC (ADX:AWNIC) Is Increasing Its Dividend To د.إ0.20

Al Wathba National Insurance Company PJSC's (ADX:AWNIC) dividend will be increasing to د.إ0.20 on 1st of January. Even though the dividend went up, the yield is still quite low at only 3.6%.

Check out our latest analysis for Al Wathba National Insurance Company PJSC

Al Wathba National Insurance Company PJSC's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Al Wathba National Insurance Company PJSC was paying only paying out a fraction of earnings, but the payment was a massive 406% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

If the trend of the last few years continues, EPS will grow by 23.9% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 19% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the first annual payment was د.إ0.058, compared to the most recent full-year payment of د.إ0.20. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Al Wathba National Insurance Company PJSC has impressed us by growing EPS at 24% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Al Wathba National Insurance Company PJSC's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Al Wathba National Insurance Company PJSC is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Al Wathba National Insurance Company PJSC (1 doesn't sit too well with us!) that you should be aware of before investing. 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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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.