Emirates Telecommunications Group Company PJSC (ADX:EAND) Has Affirmed Its Dividend Of AED0.40

The board of Emirates Telecommunications Group Company PJSC (ADX:EAND) has announced that it will pay a dividend on the 10th of May, with investors receiving AED0.40 per share. This payment means that the dividend yield will be 4.7%, which is around the industry average.

See our latest analysis for Emirates Telecommunications Group Company PJSC

Emirates Telecommunications Group Company PJSC's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Emirates Telecommunications Group Company PJSC was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. The business is earning enough to make the dividend feasible, but the cash payout ratio of 88% indicates it is more focused on returning cash to shareholders than growing the business.

The next year is set to see EPS grow by 8.8%. If the dividend continues on this path, the payout ratio could be 63% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from AED0.636 total annually to AED0.80. This implies that the company grew its distributions at a yearly rate of about 2.3% over that duration. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend's Growth Prospects Are Limited

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. However, Emirates Telecommunications Group Company PJSC has only grown its earnings per share at 2.9% per annum over the past five years. Growth of 2.9% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

Our Thoughts On Emirates Telecommunications Group Company PJSC's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Emirates Telecommunications Group Company PJSC's payments, as there could be some issues with sustaining them into the future. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Emirates Telecommunications Group Company PJSC that investors need to be conscious of moving forward. Is Emirates Telecommunications Group Company PJSC not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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