Fujairah Building Industries P.J.S.C (ADX:FBI) Is Due To Pay A Dividend Of AED0.30

The board of Fujairah Building Industries P.J.S.C. (ADX:FBI) has announced that it will pay a dividend on the 1st of January, with investors receiving AED0.30 per share. The dividend yield will be 8.6% based on this payment which is still above the industry average.

Check out our latest analysis for Fujairah Building Industries P.J.S.C

Estimates Indicate Fujairah Building Industries P.J.S.C's Could Struggle to Maintain Dividend Payments In The Future

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Fujairah Building Industries P.J.S.C's profits didn't cover the dividend, but the company was generating enough cash instead. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

If the company can't turn things around, EPS could fall by 13.8% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 253%, which is definitely a bit high to be sustainable going forward.

Fujairah Building Industries P.J.S.C Doesn't Have A Long Payment History

Fujairah Building Industries P.J.S.C's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2017, the dividend has gone from AED0.05 total annually to AED0.30. This means that it has been growing its distributions at 25% per annum over that time. Fujairah Building Industries P.J.S.C has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Fujairah Building Industries P.J.S.C's earnings per share has shrunk at 14% a year over 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.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Fujairah Building Industries P.J.S.C's payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Fujairah Building Industries P.J.S.C has 2 warning signs (and 1 which makes us a bit uncomfortable) 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.