In a move that many analysts consider a global first, Emaar has announced plans to pay a fixed dividend of 20 fils per share for 2007 and beyond. This effectively means Emaar’s dividend will remain the same, no matter its future profits, in a move unlikely to be popular with retail investors.
“If the dividend is a fixed amount, people may see it as a bond and real bonds pay a much higher return,” said Mohammed Ali Yasin, Emirates Securities managing director. The 20 per cent dividend is on the company’s nominal share price, which is Dh1.
Based on yesterday’s closing share price of Dh11.30, this dividend provides a yield of 1.8 per cent. Yasin said: “The size of the dividend is neutral and was something that long-term investors and fund managers were expecting. Speculators will be disappointed.” Emaar has asked shareholders to meet on March 19 to vote on the proposed dividend, the company said in a statement on the Dubai Financial Market yesterday. “The company has adopted the policy of distributing annual profits to shareholders at the rate of 20 per cent of the face value of the share,” it said.
The remainder of Emaar’s annual profits will be allocated to its reserves. “The dividend was in line with expectations and with the postponement of the Emaar MGF initial public offering, the company could probably do with all the cash it can get,” said Amro Diab, EFG-Hermes head of institutional sales. Analysts predict a rocky opening for Emaar on the market today. Yasin added: “There will be a lot of selling but I still believe in the long-term value of the stock. If it falls sharply in early trading, it should rebound strongly.”
Emaar’s 20% dividend offer disappoints shareholders