Is It Smart To Buy Abu Dhabi National Takaful Company PSC (ADX:TKFL) Before It Goes Ex-Dividend?

It looks like Abu Dhabi National Takaful Company PSC (ADX:TKFL) is about to go ex-dividend in the next three days. This means that investors who purchase shares on or after the 24th of March will not receive the dividend, which will be paid on the 14th of April.

Abu Dhabi National Takaful Company PSC's next dividend payment will be د.إ0.20 per share, and in the last 12 months, the company paid a total of د.إ0.20 per share. Based on the last year's worth of payments, Abu Dhabi National Takaful Company PSC has a trailing yield of 3.3% on the current stock price of AED6. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

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

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Abu Dhabi National Takaful Company PSC's payout ratio is modest, at just 26% of profit.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see how much of its profit Abu Dhabi National Takaful Company PSC paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Abu Dhabi National Takaful Company PSC's earnings per share have been growing at 14% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last nine years, Abu Dhabi National Takaful Company PSC has lifted its dividend by approximately 6.5% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

From a dividend perspective, should investors buy or avoid Abu Dhabi National Takaful Company PSC? Companies like Abu Dhabi National Takaful Company PSC that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Overall, Abu Dhabi National Takaful Company PSC looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

In light of that, while Abu Dhabi National Takaful Company PSC has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Abu Dhabi National Takaful Company PSC has 1 warning sign we think you should be aware of.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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