(Bloomberg) -- Stocks listed in Dubai jumped the most in three years, led by real estate firms after Emaar Properties PJSC increased its dividend.
The Dubai Financial Market General Index gained as much as 4.4% to the highest level since October 2014, led by Emaar and its subsidiary Emaar Development PJSC, which both rose by the maximum allowed 15%. The emirate’s biggest lender — Emirates NBD Bank PJSC — also rallied to a record high. In neighboring Abu Dhabi, top developer Aldar Properties PJSC got a boost, rising 4.7%.
Emaar Properties on Friday said it intends to declare dividends at 100% of its share capital for 2024 and the following few years. It will set up a long-term dividend policy based on generated cash flows and projected operating cash flows, according to a statement.
The proposal to double “dividends signals a greater confidence in Emaar’s cash flow generation ability,” Divye Arora, the head of portfolio management at Daman Investment Psc. “This is tied to Dubai’s solid macroeconomic backdrop supported by strong population and tourism growth.” The move has also boosted investor sentiment toward the broader market, he said.
Dubai’s benchmark index has jumped 24% this year, far outperforming the MSCI Emerging Markets Index’s near 8% gains. It’s also the best performer among Gulf benchmarks in 2024.
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Demand for real estate in Dubai has been booming post-pandemic, buoyed by liberal visa policies and low taxes that have attracted millionaires and investments.
Home prices have surged more than 60% higher since 2020. The luxury end of the emirate’s real estate market — including waterfront villas on the city’s man-made palm-shaped islands — has benefited from an influx of wealthy investors. Among them have been Russians seeking to shield their assets, crypto millionaires and rich Indians seeking second homes. Meanwhile rents have also surged with home leases climbing 18% in the year through November.
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Despite the surge in the property market, Emaar has been conservative with its dividend distribution. Its founder and Managing Director Mohamed Alabbar has often opted to conserve cash as a cushion against surprises in the volatile real estate market.
Nonetheless, Emaar’s biggest shareholder, the Dubai government, “must have played a significant role” in the decision to hike dividends, said Mohammed Ali Yasin, founder and chief executive officer of Oracle Financial Consultancy and Investments. “Also considering the recent changes to the tax law, companies with net profit higher than their capital would have an incentive to return profit to shareholders instead of allowing that money to become taxable next year.”
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Emaar is expected to report end of year profit of 11.4 billion dirhams ($3.1 billion), according to data compiled by Bloomberg. That compares with profit of about 4 billion dirhams in 2021 highlighting the company’s booming business. Emaar’s profit in 2025 is likely to hit 12.8 billion dirhams as many developments under construction are completed, according to analyst estimates.
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