Abu Dhabi National Takaful Company PSC's (ADX:TKFL) Upcoming Dividend Will Be Larger Than Last Year's

Abu Dhabi National Takaful Company PSC (ADX:TKFL) has announced that it will be increasing its dividend from last year's comparable payment on the 10th of May to AED0.2571. The payment will take the dividend yield to 4.7%, which is in line with the average for the industry.

View our latest analysis for Abu Dhabi National Takaful Company PSC

Abu Dhabi National Takaful Company PSC Is Paying Out More Than It Is Earning

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, the dividend made up 148% of earnings, and the company was generating negative free cash flows. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.

Looking forward, EPS could fall by 21.0% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could reach 201%, which could put the dividend in jeopardy if the company's earnings don't improve.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of AED0.108 in 2013 to the most recent total annual payment of AED0.2571. This implies that the company grew its distributions at a yearly rate of about 9.1% 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.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Abu Dhabi National Takaful Company PSC's EPS has fallen by approximately 21% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Abu Dhabi National Takaful Company PSC's Dividend Doesn't Look Great

In conclusion, we have some concerns about this dividend, even though it being raised is good. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, this doesn't get us very excited from an income standpoint.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Abu Dhabi National Takaful Company PSC you should be aware of, and 2 of them shouldn't be ignored. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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