Shares of budget carrier Air Arabia dropped significantly as shareholders are exiting the stock after a dividend payout.
On March 18, Air Arabia declared Dh338.3 million dividend payout to shareholders, or 7.25 fils per share—representing 7.25 per cent of its earnings.
“The decline in the share price is mainly driven by the dividend ex-date effect [the date of which the holder of a stock will be entitled to a dividend payout],”said Ahmed Adel, a senior research analyst at Egypt-based Naeem Holding.
Year to date, the stock declined around 7 per cent. Currently it trades at Dh1.44.
“The stock reached its peak at Dh1.67 on Feb.17 and started a downward trend, which was driven by weaker than expected fourth quarter results,” said Mr Adel.
Air Arabia reported in February a net profit of Dh435m for 2013, up 2 per cent compared to a year earlier. Revenue for the airline was at Dh3.2 billion, an increase of 14 per cent year-on-year.
UAE companies have been rewarding shareholders with dividends after delivering strong earnings growth and amid a positive outlook across sectors from transport to property.
First Gulf Bank, the Abu Dhabi-based lender, said it would distribute a 100 per cent dividend, after its profit gained 15 per cent in 2013.
Dubai Islamic Bank, the country's biggest Sharia-compliant lender, said that it would pay out a 25 fils per share dividend after its profit soared 42 per cent, the biggest gain of banks that have reported full-year earnings so far.
Air Arabia said earlier that it would operate from Ras Al Khaimah International Airport, after RAK Airways suspended operations late last year. It currently operates in three hubs: Sharjah, Alexandria and Casablanca.
selgazzar@thenational.ae
Follow us on Twitter @Ind_Insights
