Al Dhafra Insurance Company P.S.C (ADX:DHAFRA) Will Pay A Smaller Dividend Than Last Year

Al Dhafra Insurance Company P.S.C. (ADX:DHAFRA) has announced it will be reducing its dividend payable on the 18th of April to د.إ0.35, which is 13% lower than what investors received last year. The dividend yield will be in the average range for the industry at 7.0%.

Check out our latest analysis for Al Dhafra Insurance Company P.S.C

Al Dhafra Insurance Company P.S.C's Earnings Easily Cover the Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Earnings per share could rise by 12.1% over the next year if things go the same way as they have for the last few years. If the dividend continues growing along recent trends, we estimate the payout ratio could reach 85%, which is on the higher side, but certainly still feasible.

Al Dhafra Insurance Company P.S.C's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. There hasn't been much of a change in the dividend over the last 9. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Al Dhafra Insurance Company P.S.C Might Find It Hard To Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Al Dhafra Insurance Company P.S.C has seen EPS rising for the last five years, at 12% per annum. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

The Dividend Could Prove To Be Unreliable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Al Dhafra Insurance Company P.S.C that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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