UAE investors reap rewards for betting big on dividend stocks
EMIRATES NBD, EMAAR AMONG ANALYSTS’ PICKS FOR BEST PAYING STOCKS
Regional investors who were unsure if they should put their hard-earned money in stocks and sought shelter in high dividend-paying companies rightly reaped heaps in dividend payouts this year.
Unruffled by a year where global markets turned heavily volatile, the dividend paying capacity of most UAE stocks helped them retain the top dividend yields in the Middle East and Northern Africa (Mena) region, an analysis by EFG Hermes showed, who estimate a nearly 5.5 per cent dividend yield in 2020.
Banking’s contribution
Total dividends paid in the UAE in the last fiscal year were up by over 16 per cent to reach $10 billion (Dh36.7 billion), compared to a year earlier, out of which a little over a half is contributed by the banking sector, which is usually a major contributor. With another fiscal year wrapping up, the story is expected to repeat itself.
“Multiple expansion and earnings growth are the most important for the short run, but dividends are a consistent positive contributor and are a useful source of ‘funding’ in markets like the UAE which stood out in 2019”, said Mohammad Al Haj,
■ an equities strategist at EFGHermes. The brokerage said the UAE is seen as the most compelling GCC market for 2020 from a “bottom-up perspective”, which is a strategy that first considers macroeconomic factors when making an investment decision.
“There is a perennial demand for dividend yielding stocks in the UAE market which is dominated by retail investors,” M.R. Raghu, head of research at the Kuwait Financial Centre (Markaz).
“In the recent earnings season most of the company management have indicated higher dividend payouts to reward the investors and we see this trend to continue.”
Multiple analysts said Emirates NBD, which had a payout ratio of 22 per cent last year, is well-positioned to increase its dividend in the medium term.
Analysts at EFG Hermes said in a note the top lender’s capital buffer is satisfactory, internal capital generation is likely to be strong and risk-weighted assets growth is likely to be moderate.
RAK Ceramics at top
EFG Hermes picked Emaar Development and Ras Al Khaimah Ceramics as its top two dividend payers in the region, estimating that Emaar Development will record a dividend yield of 14.4 per cent in 2020. RAK Ceramics, which had a dividend yield of 8.5 per cent in 2019, is expected to have a yield of 9.7 per cent in the year ahead.
Abu Dhabi’s Aldar Properties, which gained 35 per cent in 2019 despite the challenging UAE real estate market backdrop, offers what analysts termed a “decent” dividend yield, with a potential to rise further. Aldar last year acquired $1 billion worth of real estate assets from the stateowned Tourism Development & Investment Company (TDIC).
Going into 2020, Dubaibased logistics player Aramex offers a “lucrative” dividend yield, analysts at EFG Hermes said, adding that Expo 2020 may boost its 2020 share price by driving an increase in UAE volumes and potentially increasing foreign ownership limits.
Among others Air Arabia also offers a high chance of dividend resumption in early 2020 and Adnoc Distribution is expected to pay shareholders Dh2.39 billion in 2019.