Dubai National Insurance & Reinsurance (P.S.C.) (DFM:DNIR) Has Announced That It Will Be Increasing Its Dividend To AED0.15

Dubai National Insurance & Reinsurance Co. (P.S.C.)'s (DFM:DNIR) periodic dividend will be increasing on the 1st of January to AED0.15, with investors receiving 50% more than last year's AED0.10. This takes the annual payment to 2.6% of the current stock price, which unfortunately is below what the industry is paying.

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Dubai National Insurance & Reinsurance (P.S.C.)'s Future Dividend Projections Appear Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Dubai National Insurance & Reinsurance (P.S.C.)'s dividend was only 27% of earnings, however it was paying out 726% of free cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Looking forward, EPS could fall by 1.6% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 32%, which is definitely feasible to continue.

View our latest analysis for Dubai National Insurance & Reinsurance (P.S.C.)

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of AED0.20 in 2015 to the most recent total annual payment of AED0.10. The dividend has shrunk at around 6.7% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. However, Dubai National Insurance & Reinsurance (P.S.C.)'s EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Dubai National Insurance & Reinsurance (P.S.C.)'s Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Dubai National Insurance & Reinsurance (P.S.C.) will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Dubai National Insurance & Reinsurance (P.S.C.) you should be aware of, and 2 of them are a bit concerning. Is Dubai National Insurance & Reinsurance (P.S.C.) 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.