Arabian Scandinavian Insurance Company (PLC) - Takaful - ASCANA Insurance (DFM:ASCANA) Has Announced That It Will Be Increasing Its Dividend To د.إ0.15

Arabian Scandinavian Insurance Company (PLC) - Takaful - ASCANA Insurance's (DFM:ASCANA) dividend will be increasing to د.إ0.15 on 1st of January. This will take the annual payment from 8.7% to 8.7% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Arabian Scandinavian Insurance Company (PLC) - Takaful - ASCANA Insurance

Arabian Scandinavian Insurance Company (PLC) - Takaful - ASCANA Insurance Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. This high of a dividend payment could start to put pressure on the balance sheet in the future.

Looking forward, EPS could fall by 26.4% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 474%, which could put the dividend under pressure if earnings don't start to improve.

Arabian Scandinavian Insurance Company (PLC) - Takaful - ASCANA Insurance's Dividend Has Lacked Consistency

It's comforting to see that Arabian Scandinavian Insurance Company (PLC) - Takaful - ASCANA Insurance has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. Since 2013, the dividend has gone from د.إ0.14 to د.إ0.15. This works out to be a compound annual growth rate (CAGR) of approximately 1.1% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Has Limited Growth Potential

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings per share has been sinking by 26% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Arabian Scandinavian Insurance Company (PLC) - Takaful - ASCANA Insurance's Dividend Doesn't Look Great

In summary, investors will like to be receiving a higher dividend, but we have some questions about whether it can be sustained over the long term. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 4 warning signs for Arabian Scandinavian Insurance Company (PLC) - Takaful - ASCANA Insurance (of which 2 shouldn't be ignored!) you should know about. Is Arabian Scandinavian Insurance Company (PLC) - Takaful - ASCANA Insurance 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.