Air Arabia shares rallied to a 21-month high on bets the Middle East's biggest no-frills airline will boost its dividend payment as profit jumps.
The shares advanced 1.8 per cent to 79.7 fils, the highest intraday level since March 2011, extending their seven-day gain to 8.4 per cent. The stock was the second-most traded by volume on the benchmark DFM General Index, which rose 0.4 per cent. The shares trade at a gross dividend yield of 7.6 per cent, compared with 3.9 per cent for the benchmark measure, data compiled by Bloomberg show.
Air Arabia's 2012 profit may jump 44 per cent to Dh387 million, according to the average estimate of eight analysts on Bloomberg. The Sharjah-based airline last paid a cash dividend of Dh0.06 a share for 2011, when profit dropped 12 per cent, data compiled by Bloomberg show.
"Investors are positioning themselves in anticipation of the dividends for 2012," said Samer Darwiche, an analyst at Gulfmena Investments. "The company had good operational results in 2012 and now approaching year end, investors are betting on a dividend yield of 9 per cent to 10 per cent."
Eight analysts recommend investors buy Air Arabia shares, while four have a hold recommendation on the stock and one advises selling it, according to data compiled by Bloomberg. Air Arabia's 14-day relative strength index rose to 84 today. A reading above 70 indicates to some analysts that a security is poised to decline.
* Bloomberg News