Abu Dhabi National Takaful Company PSC (ADX:TKFL) Has Announced That It Will Be Increasing Its Dividend To د.إ0.25

Abu Dhabi National Takaful Company PSC (ADX:TKFL) has announced that it will be increasing its dividend on the 14th of April to د.إ0.25, which will be 25% higher than last year. This takes the annual payment to 4.5% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Abu Dhabi National Takaful Company PSC

Abu Dhabi National Takaful Company PSC's Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, Abu Dhabi National Takaful Company PSC's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share could rise by 12.7% 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 27% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the first annual payment was د.إ0.11, compared to the most recent full-year payment of د.إ0.20. This means that it has been growing its distributions at 5.8% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see Abu Dhabi National Takaful Company PSC has been growing its earnings per share at 13% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On Abu Dhabi National Takaful Company PSC's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Abu Dhabi National Takaful Company PSC's payments are rock solid. While Abu Dhabi National Takaful Company PSC 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 1 warning sign for Abu Dhabi National Takaful Company PSC 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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