Abu Dhabi National Takaful Company PSC's (ADX:TKFL) Shareholders Will Receive A Bigger Dividend Than Last Year

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. Even though the dividend went up, the yield is still quite low at only 3.5%.

View our latest analysis for Abu Dhabi National Takaful Company PSC

Abu Dhabi National Takaful Company PSC's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Abu Dhabi National Takaful Company PSC is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS could expand by 12.7% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 27%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from د.إ0.11 in 2012 to the most recent annual payment of د.إ0.25. This implies that the company grew its distributions at a yearly rate of about 8.2% over that duration. 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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Abu Dhabi National Takaful Company PSC has grown earnings per share at 13% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Abu Dhabi National Takaful Company PSC's prospects of growing its dividend payments in the future.

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

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Abu Dhabi National Takaful Company PSC has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about. 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.