Regular readers will know we love our dividends at Simply Wall St, which is why it’s exciting to see Emirates Telecommunications Group Company PJSC (ADX:ETISALAT) is set to trade ex-dividend in the next 3 days. The ex-dividend date is usually one business day before the record date which is the latest date by which you must be present on the books of the company as a shareholder in order to receive the dividend. The ex-dividend date is important because any stock transaction must have settled before the record date to be eligible for a dividend. Therefore, if you buy shares of Emirates Telecommunications Group Company PJSC on or after April 14, you will not be eligible to receive the dividend when it is paid on April 25.
The company’s next dividend payment will be د.إ0.40 per share, and over the past 12 months the company has paid a total of د.إ0.80 per share. Over the past 12 months of distributions, Emirates Telecommunications Group Company PJSC has a yield of approximately 2.1% on its current share price of AED 37.78. Dividends are an important source of income for many shareholders, but the health of the company is essential to sustaining those dividends. We therefore need to consider whether Emirates Telecommunications Group Company PJSC can afford its dividend, and whether the dividend could increase.
See our latest analysis for Emirates Telecommunications Group Company PJSC
Dividends are usually paid out of company profits, so if a company pays out more than it has earned, its dividend is usually at risk of being reduced. Emirates Telecommunications Group Company PJSC pays an acceptable percentage of 75% of its profits, a level of payment common to most companies. Still, cash flow is even more important than earnings in evaluating a dividend, so we need to see if the company has generated enough cash to pay its distribution. It paid out 83% of its free cash flow as dividends, which is within typical limits but will limit the company’s ability to increase the dividend if there is no growth.
It is positive to see that the Emirates Telecommunications Group Company PJSC dividend is covered by both earnings and cash flow, as this is generally a sign that the dividend is sustainable, and a lower payout ratio generally suggests a greater margin of safety before the dividend is cut.
Click here to see the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have earnings and dividends increased?
Companies that aren’t growing profits can still be valuable, but it’s even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business goes into a recession and the dividend is cut, the company could see its value drop precipitously. This explains why we are not too excited about the stable revenues of Emirates Telecommunications Group Company PJSC over the past five years. We’d take that on a drop in earnings any day, but over the long term, the best dividend-paying stocks all increase their earnings per share. A payout ratio of 75% sounds like an unspoken signal from management that opportunities for reinvestment in the business are low. Given limited earnings growth in recent years, this is not the most attractive combination.
Many investors will gauge a company’s dividend yield by evaluating how much dividend payouts have changed over time. Emirates Telecommunications Group Company PJSC has recorded dividend growth of 3.9% per annum on average over the past 10 years.
Has Emirates Telecommunications Group Company PJSC got what it takes to maintain its dividend payments? Emirates Telecommunications Group Company PJSC has struggled to increase its earnings per share, and although the company pays out the majority of its earnings and cash flow in the form of dividends, the dividend payments do not seem unsustainable. In summary, it is hard to get excited about Emirates Telecommunications Group Company PJSC from a dividend perspective.
Wondering what the future holds for Emirates Telecommunications Group Company PJSC? See the forecasts of the seven analysts we follow, with this visualization of its historical and future estimated earnings and cash flow
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.