Investors cheered Air Arabia yesterday after the region's biggest budget airline increased its dividend payout for last year.
The airline, based in Sharjah, will pay a cash dividend of 6 fils per share, after net profit rose to Dh78.7 million, an increase of 7 per cent from the year-earlier period. Air Arabia's board on February 25 proposed a dividend of 4.5 per cent of capital, equivalent to 4.5 fils per share.
"Investors have become much more demanding at the annual general meetings," said Marwan Shurrab, the chief trader at Gulfmena Investments in Dubai."They have been asking for a raise in the dividend of companies, but Air Arabia's endorsement on Monday was unexpected and is benefiting the stock today."
The dividend payment translates into a yield of 8.5 per cent. Air Arabia was up 5 per cent in midday trading, its biggest one-day price increase since March 4, bringing its year-to-date increase to 26 per cent. Air Arabia has historically paid high dividends, including 10 per cent last year.
The stock has been a hedge for investors even in the most trying of economic times.
Air Arabia's shares outperformed property and banking stocks despite being hit hard during the popular uprisings that swept countries in parts of the Middle East and North Africa (Mena).
The airline aims to achieve passenger growth of about 7 or 8 per cent this year, Adel Ali, the chief executive, told The National in January. Air Arabia carried 4.7 million passengers last year, an increase of 6 per cent compared from 2010.
The company aims to expand its network and operations in Europe and the Mena region. Its now operates 73 international routes in the Middle East, Europe, the Indian subcontinent, central Asia and North Africa.
In those regions, Air Arabia has teamed up with local partners such as Regional Air Lines of Morocco, Tantash Group of Jordan and Travco Group of Egypt to expand its network.