Al Wathba National Insurance Company PJSC's (ADX:AWNIC) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Al Wathba National Insurance Company PJSC (ADX:AWNIC) has announced that it will be increasing its dividend on the 25th of May to د.إ0.20. Although the dividend is now higher, the yield is only 3.6%, which is below the industry average.

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

Al Wathba National Insurance Company PJSC's Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Al Wathba National Insurance Company PJSC's dividend was only 25% of earnings, however it was paying out 406% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, earnings per share could rise by 23.9% over the next year if the trend from the last few years continues. 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

The company's dividend history has been marked by instability, with at least 1 cut 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 means that it has been growing its distributions at 13% per annum 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 seen EPS rising for the last five years, at 24% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On Al Wathba National Insurance Company PJSC's Dividend

Overall, we always like to see the dividend being raised, but we don't think Al Wathba National Insurance Company PJSC will make a great income stock. While Al Wathba National Insurance Company PJSC is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

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 is a bit unpleasant!) 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.