Emirates Insurance Company P.J.S.C (ADX:EIC) Has Announced That Its Dividend Will Be Reduced To AED0.50

Emirates Insurance Company P.J.S.C. (ADX:EIC) is reducing its dividend from last year's comparable payment to AED0.50 on the 1st of January. Despite the cut, the dividend yield of 6.8% will still be comparable to other companies in the industry.

We've discovered 2 warning signs about Emirates Insurance Company P.J.S.C. View them for free.

Emirates Insurance Company P.J.S.C's Future Dividend Projections Appear Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, Emirates Insurance Company P.J.S.C's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Unless the company can turn things around, EPS could fall by 0.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 68%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Check out our latest analysis for Emirates Insurance Company P.J.S.C

Emirates Insurance Company P.J.S.C Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2015, the annual payment back then was AED0.54, compared to the most recent full-year payment of AED0.50. Dividend payments have shrunk at a rate of less than 1% per annum over this time frame. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. However, Emirates Insurance Company P.J.S.C's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On Emirates Insurance Company P.J.S.C's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Emirates Insurance Company P.J.S.C that investors should take into consideration. Is Emirates Insurance Company P.J.S.C 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.