Abu Dhabi’s benchmark index rallied to the highest level in more than three years as investors seek to tap higher dividends offered by the emirate’s banks.
United Arab Emirates lenders have raised their dividend payouts as they recover from the impact of the global credit crisis which slowed lending, hit investment banking and led to a surge in loan-loss charges as defaults rose. Abu Dhabi banks offer an average dividend yield of 4.1 percent, compared with 3.2 percent for the Bloomberg GCC 200 Financial Index of the Gulf Cooperation Council’s most-traded equities.
“Liquidity is searching for dividend-paying stocks with high yields,” said Nabil Farhat, partner at Abu Dhabi-based Al Fajer Securities.
First Gulf Bank PJSC, which recommended a cash dividend of 83 fils per share for 2012, rose 1.2 percent, the biggest mover on the ADX General Index, which gained 1.1 percent to 2,955.44, the strongest level since November 2009. Abu Dhabi Commercial Bank PJSC, the third-biggest U.A.E. lender by assets, advanced to the highest level in more than four years.
Abu Dhabi Commercial said in January it would pay a 25 percent cash dividend for 2012, up from 20 percent from a year earlier, after fourth-quarter profit rose 19 percent. Shares of the lender, which said Feb. 11 it hired banks for a possible dollar bond sale, have surged 6.8 percent in the past three days. It climbed 1.9 percent today to 3.79 dirhams, the strongest level since September 2008.
First Gulf, whose 2012 profit grew 12 percent, advanced to 13 dirhams, the highest since August 2008. The bank will probably post the fastest loan growth in the U.A.E. in 2013, EFG-Hermes Holding SAE said in December. Net income is set to grow 7 percent in 2013, according to the average estimate of 11 analysts compiled by Bloomberg.
About 310 million shares were traded in Abu Dhabi today, compared with a 12-month daily average of 79 million, according to data compiled by Bloomberg. The measure’s 14-day relative strength index rose to 83 today from 80. A reading above 70 indicates to some analysts that a security is poised to drop.