a lot's going to happen with and for UAE stock markets in the coming days. First up, there is the Parkin IPO. Image Credit: Bloomberg

Dubai: It’s the start of a busy few days for UAE stock markets as the first set of dividends on 2023 performances reach shareholders, including the ‘special’ one from Emirates NBD. The Dubai bank had announced 120 fils a share for 2023, which includes 20 fils to mark its 60th anniversary.

Among the Top 3 banks in the country, investors who were holding the stock until February 29 are entitled to the dividend after Emirates NBD recorded its highest ever net profit, at Dh21.5 billion.

Of course, then there is the opening tomorrow (March 5) of the IPO from Parkin, the RTA-affiliated parking spaces operator in Dubai. Retail investors can subscribe to 10 per cent of the offer, unless there is a revision of the issue size. The minimum application is Dh5,000 and with any additional application to be made at multiples of Dh1,000.

The pricing of the Parkin stock will be announced in the coming hours, with most market observers expecting a 'certain premium' to the offer.

The FATF booster

But market watchers will also be looking at the size of the overseas institutional investor interest, especially as this is the first UAE IPO after the UAE’s removal from the FATF ‘grey’ list last week.

“What’s especially interesting with Parkin IPO is there are separate legal advisors appointed for US and European investors, along with roadshows, indicating a steady buildup of overseas investor interest,’ said Sameer Lakhani, Managing Director at Global Capital Partners.

“This has spilled over into the UAE’s secondary markets as well, with increased institutional interest in heavyweight stocks like e& and IHC, as well as those of Multiply and Q Holding (all ADX-listed).”

Analysts say that upcoming UAE IPOs too will be pursuing institutional investors from Europe and the US with increased alacrity after the FATF decision. “The FATF list update’s immediate impact will be felt on the UAE stock markets, especially on select ‘bluest of blue’ stocks.”

As such, institutional interest in UAE IPOs over the last two years already account for between 88-98 per cent of all allocations. What changes now is more Western funds, including pension-linked investments, starting to show up among holders of prime UAE stocks.

Year-to-date runs for UAE stock markets
In the year-to-date, the DFM is up 7.3 per cent, while ADX has had a decline of 3.1 per cent.

In February, Saudi Arabia was the best performing Gulf market, with a gain of 7.1% followed by Qatar and Dubai, with gains of 3.8% and 3.4%, respectively, according to KAMCO Invest, headquartered in Kuwait.

The Kuwait’s All Share Index also showed a gain of 2.4%.

On the decline side, Bahrain reported the biggest decline during the month (3%) followed by Abu Dhabi and Oman, with relatively smaller ones.

In terms of YTD-2024 performance, Kuwait topped the GCC chart with a return of 9.1% followed by Dubai and Saudi Arabia with 6.1% and 5.5%, respectively.

DIB and ADIB dividends

Amidst the Parkin IPO subscription run, more ‘record dates’ and ex-dividend dates will get the attention of investors. There are the shareholder payments from DIB and ADIB, with the former paying 45 fils a share for a total of D3.25 billion. (That works to a dividend yield of a hefty 6.9 per cent).

ADIB raised its 2023 payout to 71 fils a share from 2022’s 49 fils, in a total payout of Dh2.59 billion for 2023. “The notable increase in profitability, coupled with our robust capital position, has enabled us to propose an enhanced dividend payout of 71 fils per share,” is how Jawaan Awaidha Suhail Al Khaili, ADIB's Chairman, says it.

And then into April the full measure of the dividends inflows into shareholder accounts will show up, including another Dh400 million from Tecom Group for its H2-2023 performance.

Each of ADX and DFM have laid out a clear, quantifiable capitalization target of Dh3b for their respective stock markets, which ADX has already achieved

- Amer Halawi at Al Ramz Corporation

“Roughly half of all listed companies in the UAE pay a dividend,” said Amer Halawi, Head of Research at Al Ramz Corporation, in a recent interview. “The aggregate dividend yield of the market is about 2 per cent, which decreases to 1.4 per cent if we exclude e&, du, Emaar, Emaar Development, and the 22 companies listed since 2021.

“The recent IPO batch alone generates an aggregate yield of 4.5 per cent, more than twice the rest of the market.

“In terms of total aggregate nominal dividends, it is safe to assume that the IPO batch distributes nearly as much as the rest of the market.”

Parkin will continue the tradition

The latest IPO, Parkin, has set a dividend policy of paying a minimum payout of the higher of:

  1. 100 per cent of profit for the year; or the
  2. Free cash flow to equity, (subject to distributable reserves requirement).

The other RTA entity, Salik, too has a 100 per cent profit distribution as dividend policy.

“Dividends have been a key impulse for investors, with yields in the range of 4 to 7 per cent, which is significantly higher than their counterparts in the West,” said Lakhani. “Family offices, high networth investors as well as retail buyers will continue to benefit as emerging market indices increase their weightages to the UAE stock markets in the coming years.

“Also, with market makers entering and further incentives being provided for listing, the influx of international hedge funds and mutual funds is expected to increase as more UAE companies start to list…”