Lavish cash dividends freeze Du balance sheet growth?

Interim dividend in current year exceeds H1 earnings

DUBAI: Has the successive dividend distribution by Emirates Integrated Telecommunications Company (Du), the leading telecom player from Dubai, resulted in freezing its balance sheet growth over the years?

An analysis of the balance sheet of the company for the past five years revealed that Du that had an asset base of AED17.144 billion and an equity capital (net worth) of AED7.914 billion as of 2015 end, saw its asset base de-grow to AED14.466 billion, whereas the equity base managed to inch up by 4.44 per cent to AED8.266 billion as of June 30, 2020.

The company seems to have been unbothered about saving for the proverbial ‘rainy day’ all these years and went on distributing most of the profit that came its way and kept the shareholders happy.

According to a rough estimate, the company has given away as cash dividends about 95 per cent of what it earned during the past five years since 2015. The company distributed about AED8.44 billion as dividends on a share capital of about AED4.5 billion made of shares with face value of AED1.

The share that closed at AED5.08 on DFM on Wednesday (July 29) has historically been able to ensure the shareholders a dividend yield in the range of 5.50 per cent to 7 per cent, which is really handsome.

According to analysts, businessbenchmark.news  spoke to, the company’s uninterrupted dividend distribution may have amounted to ‘eating the seed corn’ during these years.

A big chunk of the funds earned by the company that failed to find its way to the  net worth, have thus predominantly been utilised for lavishing the shareholders with plush cash dividends.

Though the company had built a net worth of AED8.648 billion as of December end, 2019, again by June, 2020, this has shrunk to AED8.266 billion by June 2020.

Again, in the year 2020, an interim cash dividend of AED 0.13 per share amounting to AED 589.278 million has been proposed though the post-tax profit earned by the company for the June ending first half year was AED570.41 million – a tad below the interim dividend announced.

 

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