Stock Analysis

Abu Dhabi National Energy Company PJSC (ADX:TAQA) Has Announced That It Will Be Increasing Its Dividend To د.إ0.011

ADX:TAQA
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Abu Dhabi National Energy Company PJSC (ADX:TAQA) has announced that it will be increasing its dividend on the 1st of January to د.إ0.011, which will be 10.0% higher than last year. Although the dividend is now higher, the yield is only 2.2%, which is below the industry average.

See our latest analysis for Abu Dhabi National Energy Company PJSC

Abu Dhabi National Energy Company PJSC's Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, Abu Dhabi National Energy Company PJSC's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 5.6%. If the dividend continues on this path, the payout ratio could be 54% by next year, which we think can be pretty sustainable going forward.

historic-dividend
ADX:TAQA Historic Dividend February 14th 2022

Abu Dhabi National Energy Company PJSC Doesn't Have A Long Payment History

The company hasn't been paying a dividend for very long at all, so we can't really make a judgement on how stable the dividend has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Abu Dhabi National Energy Company PJSC has impressed us by growing EPS at 6.8% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. Taking the debate a bit further, we've identified 1 warning sign for Abu Dhabi National Energy Company PJSC that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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.