Abu Dhabi National Oil Company for Distribution PJSC (ADX:ADNOCDIST) will pay a dividend of AED0.1029

Abu Dhabi National Oil Company to allocate PJSC (ADX: ADNOCDIST) will pay a dividend of AED 0.1029 on October 27. This means that the annual payment is 4.6% of the current share price, which is higher than the industry average.

Check out our latest analysis for Abu Dhabi National Oil Company Distribution PJSC

Abu Dhabi National Oil Distribution Company PJSC’s revenue is insufficient to cover its payments

We’d like to see a strong dividend yield, but it doesn’t matter if the payout isn’t sustainable. Prior to this announcement, Abu Dhabi National Oil Company for Distribution PJSC paid a dividend of only 48% of earnings but paid out 150% of free cash flow. While the company may be more focused on returning cash to shareholders than growing the business at this point, we think such a high cash payout ratio could see the dividend cut if the business encounters some challenges.

Earnings per share will grow 1.6% over the next 12 months. However, if the dividend continues on its recent trend, it could start to weigh on the balance sheet, with a payout ratio of 103% next year.

Abu Dhabi National Oil Company’s distribution of PJSC’s dividend lacks consistency

Even in its short history, we’ve seen dividend cuts. Dividends have increased from AED 0.0588 in 2018 to AED 0.206 in the most recent year. During this period, the compound annual growth rate (CAGR) was approximately 37% per year. It’s nice to see a strong increase in dividend payments, but the cut is a concern as it could signal that the payout policy is too ambitious.

Dividend has growth potential

Given that dividends have been cut in the past, we need to examine whether earnings are growing, and whether this could lead to higher dividends in the future. We are delighted to see Abu Dhabi National Oil Distribution Company PJSC growing its EPS at an annual rate of 8.5% over the past five years. While the company looks attractive as an earnings stock on an earnings basis, the cash payout ratio still makes us cautious.

Our view on Abu Dhabi National Oil Company’s distribution of PJSC dividend

Overall, we don’t think the company’s dividend is high, even though it hasn’t been cut this year. Given the lack of cash flow, it’s hard to see how the company can sustain its dividend payments. If income is your focus, we don’t think Abu Dhabi National Oil Distribution Company PJSC is a good stock to add to your portfolio.

It’s important to note that companies with consistent dividend policies will generate greater investor confidence than those that are volatile. Still, investors need to consider many other factors besides dividend payments when analyzing a company. To this end, Abu Dhabi National Oil Distribution Company PJSC 4 warning signs (related to 1) We think you should know. Looking for more high-yielding dividend ideas?try our A collection of powerful dividend payers.

Have feedback on this article? Care about content? keep in touch Contact us directly. Alternatively, email the editorial team at simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based solely on historical data and analyst forecasts using an unbiased methodology and our articles are not intended to provide financial advice. It does not constitute advice to buy or sell any stock and does not take into account your objectives or your financial situation. Our goal is to bring you long-term focused analytics driven by fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Wall Street has no positions in any of the stocks mentioned.