IN FOCUS | High Dividend Yield Stocks
April 2016 | www.wealth-monitor.com
Dubai and Abu Dhabi have contracted
considerably at 39%, 48% and 10%
respectively between June-2014 and
March-2016. Given lower valuations,
investors can expect capital appreciation
along with dividend payouts and would
make more sense to invest in such
companies. The ideal dividend paying
stocks in the ongoing turbulent times
would be the ones that have healthy
balance sheet and have historically
demonstrated dividend growth. Moreover,
such companies should also have the
potential for growing dividends by growth
in free cash flow and earnings.
in KSA and thus affecting their margins.
The shrinking margins transmitting into
lower earnings growth and free cash flow
will affect the dividend payouts. Since
raising capital has become an obstacle,
companies with deteriorating cash
profiles would have to choose between
distributing earnings back to investors or
retain for capital expenditure. However,
it is more likely that companies would
sacrifice parts of their dividend payments
to raise cash needed for operations and
expansion.
The investors hunger for yields tend to
place a premium on the high dividend
yielding stocks. However, PE ratios for KSA,
Top Dividend Yield Companies - UAE
Company
MCAP PE Ratio Dividend Dividend
Avg
Closing
2015
(Current) Yield
Yld
Dividend Price
(USD Mn)
(Current) (2015) Yld (2011-15) (AED)
Waha Capital PJSC
1,134
7.3
8.9%
9.3%
9.1%
Emirates Insurance Co PSC
245
10.1
7.4%
7.4%
8.8%
2.24
6.72
Ras Al Khaimah Ceramics PSC
770
10.15
8.5%
8.6%
8.7%
3.53
Dubai Insurance Co PSC
68
6.7
11.1%
10.0%
8.5%
2.25
Al Ain Ahlia Insurance Co PSC
243
21.6
3.3%
5.8%
8.3%
60
Dubai National Insurance
and Reinsurance Co PSC
75
6.9
8.2%
8.3%
7.5%
2.45
2,829
6.6
9.0%
8.0%
7.4%
5.52
National Bank of
Ras Al Khaimah PSC
National Cement Co PSC
337
12.1
7.9%
7.2%
7.2%
3.5
Air Arabia PJSC
1,714
12.2
6.7%
6.6%
7.2%
1.350
Emirates Integrated Telecommunications Co PJSC (du)
6,295
14.6
6.9%
8.4%
6.9%
6.08
Closing price is as on March 14, 2016. Cut-off date of Mcap 2015 is 31st Dec, 2015
Top Dividend Yield Companies - KSA
Company
MCAP PE Ratio Dividend Dividend
Avg
Closing
2015
(Current)
Yield
Yld
Dividend Price
(USD Mn)
(Current) (2015) Yld (2011-15) (SAR)
Saudi Cement Co SJSC
2,685
10.6
7.3%
9.2%
7.8%
63
Qassim Cement Co SJSC
1,701
9.9
7.1%
8.9%
7.6%
64.5
Advanced
Petrochemical Co SJSC
1,669
9.3
7.2%
8.0%
7.2%
39.2
Saudi Chemical Co SJSC
973
12.1
8.6%
3.5%
7.1%
48.2
Saudi Arabia
Fertilizers Co SJSC
9,309
12.6
5.6%
7.3%
6.8%
69.5
Yanbu Cement Co SJSC
1,850
9.4
7.6%
11.5%
6.8%
48
Yamama Cement Co SJSC
1,722
8.8
7.4%
9.5%
6.6%
28.2
Arabian Cement Co SJSC
1,283
7.5
9.2%
9.5%
6.5%
45
Al Abdullatif Industrial
Investment Co SJSC
658
10.4
6.1%
5.2%
6.4%
17.9
Eastern Province
Cement Co SJSC
736
9.0
6.6%
7.9%
6.3%
34.5
Closing price is as on March 14, 2016. Cut-off date of Mcap 2015 is 31st Dec, 2015
Source: Reuters, Marmore Research – Sorted based on Avg Dividend Yield
Despite the fall in oil prices the payout
by the UAE companies in 2014 grew
by 19% compared to 2013. The healthy
payout by the UAE corporates during 2014
indicated the confidence in the longterm growth potential of UAE due to its
relatively diversified economy.
However, the scenario for the KSA
corporates who operate in an economy
which is not as diversified as UAE economy
has been different in 2014 where dividend
paid out by the KSA corporates contracted
by 8% (same as 2015).
Most of the companies that have paid
out high dividends during 2011 to 2015 in
UAE belong to the insurance and banking
sector. Air Arabia, du and Ras Al Khaimah
Ceramics are the only exceptions. Majority
of the top dividend yielding companies
are small and large cap companies.
Contrary to the stocks in UAE, most of the
top dividend yield stocks in KSA are large
cap. The high net income of the majority
of these companies can be attributed
to the subsidies provided by the Saudi
Government for the companies operating
in the cement and petrochemical sector.
The subsidies availed by the companies
are in the form of access to cheaper raw
materials and fuel.
The Saudi cement sector is vulnerable
since it is exposed to construction activity
in the kingdom, which has been falling
with lower state spending. However,
since the industry is less burdened by
debt (aggregate D/E ratio is 0.18x for KSA
Cement Index constituents) than others,
it should be able to maintain dividends
despite shrinking margins.
The KSA and UAE listed companies
were mostly sitting on high cash balances,
with underleveraged balance sheets, that
helped them have high dividend payout
ratios. For instance, the average payout
ratio of top dividend paying stocks of KSA
and USE was 85% and 74% respectively
between 2011 and 2015. However,
cheap oil is now threatening the pattern
of corporate dividends in Saudi Arabia
and UAE as companies find it harder to
raise funds affecting the health of the
balance sheet of companies which have
maintained high payout ratios and may
find it challenging to sustain the high
payout ratios in the coming years.
The austerity measures in the form of
higher fuel, electricity, natural gas and
feedstock prices will raise the costs of
doing business for companies especially
39