Al Wathba National Insurance Company PJSC (ADX:AWNIC) Is Paying Out Less In Dividends Than Last Year

Al Wathba National Insurance Company PJSC (ADX:AWNIC) is reducing its dividend to AED0.20 on the 1st of Januarywhich is 20% less than last year's comparable payment of AED0.25. However, the dividend yield of 6.3% still remains in a typical range for the industry.

Al Wathba National Insurance Company PJSC's Future Dividend Projections Seem Positive

We aren't too impressed by dividend yields unless they can be sustained over time. Even though Al Wathba National Insurance Company PJSC is not generating a profit, it is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

EPS is set to grow by 42.9% over the next year if recent trends continue. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 87%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

See our latest analysis for Al Wathba National Insurance Company PJSC

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was AED0.104 in 2015, and the most recent fiscal year payment was AED0.25. This works out to be a compound annual growth rate (CAGR) of approximately 9.1% 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. Al Wathba National Insurance Company PJSC might have put its house in order since then, but we remain cautious.

The Company Could Face Some Challenges Growing The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Al Wathba National Insurance Company PJSC has been growing its earnings per share at 43% a year over the past five years. The company hasn't been turning a profit, but it running in the right direction. If this trajectory continues and the company can turn a profit soon, it could bode well for the dividend going forward.

Al Wathba National Insurance Company PJSC's Dividend Doesn't Look Sustainable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. Strong earnings growth means Al Wathba National Insurance Company PJSC has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We don't think Al Wathba National Insurance Company PJSC is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Al Wathba National Insurance Company PJSC you should be aware of, and 1 of them is concerning. 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.