The Middle East’s largest low-cost airline sees stock gains after dividend hopes

Air Arabia PJSC 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 2.7 percent to 80.2 fils, the highest level since March 2011, extending their seven-day gain to 9.1 percent. The stock was the second-most traded by volume on the benchmark DFM General Index, which rose 0.4 percent. The shares trade at a gross dividend yield of 7.5 percent, compared with 3.9 percent for the benchmark measure, data compiled by Bloomberg show.

Air Arabia’s 2012 profit may jump 44 percent to 387 million dirhams ($105 million), according to the average estimate of eight analysts on Bloomberg. The Sharjah-based airline last paid a cash dividend of 0.06 dirham a share for 2011, when profit dropped 12 percent, data compiled by Bloomberg show.

“Investors are positioning themselves in anticipation of the dividends for 2012,” said Samer Darwiche , Dubai-based analyst at Gulfmena Investments Ltd. “The company had good operational results in 2012 and now approaching year end, investors are betting on a dividend yield of 9 percent to 10 percent.”

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 85 today. A reading above 70 indicates to some analysts that a security is poised to decline.

Editors: Daliah Merzaban, Peter Branton. To contact the reporter on this story: Alaa Shahine in Dubai at asalha@bloomberg.net. To contact the editor responsible for this story: Alaa Shahine at asalha@bloomberg.net.