Emirates Insurance Company P.J.S.C's (ADX:EIC) Dividend Will Be Reduced To AED0.50

Emirates Insurance Company P.J.S.C. (ADX:EIC) is reducing its dividend to AED0.50 on the 1st of Januarywhich is 9.1% less than last year's comparable payment of AED0.55. This means that the annual payment will be 6.9% of the current stock price, which is in line with the average for the industry.

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 dividend, Emirates Insurance Company P.J.S.C is earning enough to cover the payment, but then it makes up 362% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS could expand by 4.4% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 60% by next year, which is in a pretty sustainable range.

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

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

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the dividend has gone from AED0.54 total annually to AED0.55. Dividend payments have been growing, but very slowly over the period. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Emirates Insurance Company P.J.S.C May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Earnings have grown at around 4.4% a year for the past five years, which isn't massive but still better than seeing them shrink. Growth of 4.4% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

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

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While Emirates Insurance Company P.J.S.C 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 picked out 1 warning sign for Emirates Insurance Company P.J.S.C that investors should know about before committing capital to this stock. 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.