Sharjah Insurance Company P.S.C (ADX:SICO) Will Pay A Dividend Of د.إ0.08

Sharjah Insurance Company P.S.C. (ADX:SICO) will pay a dividend of د.إ0.08 on the 16th of May. Based on this payment, the dividend yield will be 5.3%, which is fairly typical for the industry.

View our latest analysis for Sharjah Insurance Company P.S.C

Sharjah 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. Prior to this announcement, Sharjah Insurance Company P.S.C's dividend was only 40% of earnings, however it was paying out 158% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Over the next year, EPS could expand by 7.1% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 38%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The first annual payment during the last 10 years was د.إ0.10 in 2012, and the most recent fiscal year payment was د.إ0.08. This works out to be a decline of approximately 2.2% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see Sharjah Insurance Company P.S.C has been growing its earnings per share at 7.1% a year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

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

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Sharjah Insurance Company P.S.C (1 is potentially serious!) that you should be aware of before investing. Is Sharjah Insurance Company P.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.