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Dubai’s benchmark stock index climbed to a nine-month high on expectations improved earnings will stoke bigger dividends when companies start reporting later this month.
Dubai Investments PJSC (DIC), which has stakes in more than 40 businesses and is set to report full-year results on Jan. 30, surged 2.9 percent. Emaar Properties PJSC (EMAAR), the developer of the world’s tallest skyscraper, reached a two-year peak. The DFM General Index (DFMGI) rose 0.9 percent to close at 1,681.75, the highest level since April 5 and taking this week’s advance to 4.4 percent.
“Fresh capital is entering the market, chasing dividend paying stocks,” said Nabil Farhat, a partner at Abu Dhabi-based Al Fajer Securities.
Shares in the Persian Gulf are luring investors as they pay more in dividends than emerging-market peers. Dubai’s stock index, the best performer in the six-nation Gulf Cooperation Council last year, with a gain of 20 percent, offers a dividend yield of 3.76 percent, compared with 2.67 percent for the MSCI Emerging Markets Index (MXEF), data compiled by Bloomberg show.
Dubai Investments last year surprised investors when it paid a cash dividend even after posting a 75 percent drop in 2011 profit. The stock advanced to 90 fils, the highest close since April 5.
Emaar posted a decline in full-year net income in 2011 and paid a dividend of 10 fils per share, disappointing some investors. Even so the company’s 12-month dividend yield of 2.6 percent is higher than the 2 percent for Arabtec Holding Co. (ARTC), a Dubai-based builder. Emaar’s net income probably rose 15 percent in 2012 to 2.07 billion dirhams ($564 million), according to the average estimate of 11 analysts on Bloomberg.
“There is speculation Emaar’s dividend recommendation this year will exceed the 10 fils paid last year,” Farhat said. Higher dividends are “a sort of return on investment to please shareholders, as the government owns big chunks of these companies,” he said.
Dubai owns 31 percent of Emaar and 12 percent of Dubai Investments, data compiled by Bloomberg show.
Emaar’s shares gained 1.3 percent to 3.91 dirhams, the highest close since October 2010. The stock rallied 46 percent last year, recovering from two years of declines.
Economic growth in Dubai, the second-biggest of the U.A.E. sheikhdoms after Abu Dhabi, reached 4.1 percent in the first half of last year, putting the emirate on track to reach the government’s forecast of 5 percent for the year, according to the Dubai Statistics Center. About 407 million shares were traded in Dubai today, compared with a 12-month daily average of 163 million.
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