Income-focused Investors: Where to Invest in the UAE

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Investors look out for different assets which match their risk appetite and return expectations. In recent years the global financial markets have become highly volatile and as

a result of this the demand for income-oriented investments have increased. The income-focused investors place more value on current incomes, and are even willing to pay higher taxes on the income in order to receive a relatively stable stream of payments. Of course to a certain extent the expectations of the regular income to capital appreciation may be influenced by the taxation policy prevailing in the economy. There are countries which tax income at a higher rate and wealth at a relatively lower rate. If there is high difference in these rates the investors with high income may prefer wealth accumulation to annual cash dividends. But the regular cash dividends are more certain than the wealth that may accumulate in the future but there is no guarantee, we have seen even large multinational firms going bankrupt. Despite the tax burden, dividend-paying stocks have historically performed very well through all tax periods, suggesting that a higher tax rates do not necessarily derail the investment appeal of dividend-paying stocks. Therefore which will you prefer, particularly when you are in a country like the UAE where there is no income tax? Genuinely, residents of UAE will want to invest in securities that pay high returns regularly and quite frequently. Here an attempt is made to identify and list down the high dividend paying companies listed in the stock exchanges in the UAE. This list is compiled after exploring the dividend trends in the UAE and includes only companies paying an average annual dividend of 25% and more during the last three years. All companies listed in the Abu Dhabi stock exchange and Dubai financial market are considered and are ranked on the basis of average dividends paid during the three year period from 2012 to 2014. This list may be useful to the income-focused investors preferring to keep investments close to their place of residence.

Top Dividend paying Companies in the UAE
Rank Sector Company Average Dividends (2012-2014)
1 Bank First Gulf Bank 94%
2 Telecommunication Etisalat 70%
3 Insurance Emirates Insurance 60%
4 Consumer Staples Dubai Refreshments Company 58%
5 Bank National Bank of Ras Al-Khaimah 47%
6 Services National Corp for Tourism and Hotels 42%
7 Insurance Al Dhafra Insurance 40%
8 Banks Mashreq Bank 39%
9 Bank National Bank of Abu Dhabi 38%
10 Insurance Al Ain Al Ahlia Insurance Company 33%
11 Consumer Staples Gulfa Mineral Water & Processing Industries 33%
12 Bank Abu Dhabi Commercial Bank 32%
13 Insurance Abu Dhabi National Insurance 30%
14 Banks Commercial Bank of Dubai 28%
15 Banks Emirates NBD 28%
16 Banks Dubai Islamic Bank 27%
17 Bank Abu Dhabi Islamic Bank 26%
18 Services Emirates Driving Company 25%

Approximately 24% of the total dividend paying companies in the UAE have paid cash dividends of 25% and above during the period 2012-2014 on an average basis. Nine out of top eighteen companies which paid the highest cash dividends were banks. First Gulf Bank and Etisalat paid average cash dividends of approximately 94% and 70% respectively during the three year period. Four insurance companies were among top cash dividend payers during the period 2012-2014. Emirates Insurance Co paid an average cash dividend of 60% during the period.
By investing in income-generating equities, investors can participate in real income growth coupled with long-term capital growth. The reasons to consider the companies that pay regular dividend are many, few of them are: Dividends are paid from real corporate earnings (profits). Dividends are paid in cash, so a company that has paid a consistent dividend over time likely has a steady stream of cash inflow. Dividend-paying companies most likely have solid business models that may allow them to navigate down markets more easily. While all companies remain subject to business risks and unforeseen problems, long-term dividend payers normally represent the cream of the crop and have historically performed very well through all periods. ​

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