Abu Dhabi National Takaful PSC (ADX:TKFL) Upcoming Dividend Will Be Higher Than Last Year

Abu Dhabi National Takaful Insurance Company PSC (ADX: TKFL) announced it would increase its dividend to AED0.2571 on May 10 from a comparable payout last year. That sum would bring the dividend yield to 4.7%, in line with the industry average.

Check out our latest analysis for Abu Dhabi National Takaful Company PSC

Abu Dhabi National Takaful PSC spends more than revenue

We would like to see a healthy dividend yield, but that will only help us if payments can continue. Before this announcement, the dividend represented 148% of earnings and the company generated negative free cash flow. Paying such a large dividend relative to earnings while not generating any free cash flow is sure to be hard to keep up.

Looking ahead, if the company cannot turn around the past few years, EPS could decline by 21.0%. If the dividend continues along recent trends, we estimate the payout ratio could reach 201%, which could put the dividend in jeopardy if the company’s earnings do not improve.

dividend volatility

The company has a long track record with dividends, but past cuts haven’t looked good. Dividends have increased from an annual total of AED 0.108 in 2013 to a recent annual payment of AED 0.2571. That means the company has grown its distribution at an annual rate of about 9.1% over the period. A reasonable dividend growth rate is a good thing, but we are concerned that the dividend history is not as solid as we would like, having been cut at least once.

Dividend growth potential is erratic

Because the dividend is relatively volatile, it’s more important to assess whether EPS is growing, which could signal future dividend growth. Abu Dhabi National Takaful Company PSC’s EPS has declined by about 21% annually for the past five years. This sharp decline could indicate that the business is going through tough times, which could limit its ability to pay larger dividends each year in the future.

Dividends don’t look good for Abu Dhabi National Takaful PSC

In conclusion, we have some concerns about this dividend, although it is good that it is raised. The company’s earnings aren’t high enough for such a large distribution, and it’s not backed by strong growth or consistency. Overall, it’s not something we’re very excited about from a revenue standpoint.

Companies with stable dividend policies are likely to receive more attention from investors than those that suffer from more inconsistent approaches. However, there are other things investors need to consider when analyzing stock performance.As an example, we encountered 3 Warning Signs of Abu Dhabi National Takaful Company PSC You should know that 2 of them should not be ignored. Looking for higher yielding dividend ideas?try our Gather strong dividend payers.

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