Dubai's state-controlled utility could reward shareholders with a bigger dividend once its current payout agreement expires, according to a new analysis from Bank of America.
In a sector note, BofA Global Research said it expects Dubai Electricity and Water Authority (DEWA) to raise its dividend by 10% to 6.8 billion dirhams (about $1.85 billion) in 2027. That would be up from the 6.2 billion dirhams the company is currently paying under a fixed-dividend framework that runs through 2026.
The bank's analysts said the projected increase would translate into a dividend yield of roughly 4.9% for shareholders. A dividend yield is the annual payout as a percentage of the stock price, so a 4.9% yield means an investor would earn about 4.9 dirhams for every 100 dirhams they have invested in the company.
Why the dividend could rise
DEWA, which provides power and water to Dubai's residents and businesses, operates as a regulated utility. That means its revenues and profits are largely predictable, tied to government-set tariffs and the emirate's growing demand for electricity and desalinated water.
BofA's confidence in a higher payout rests on what it called DEWA's “regulated and resilient” business model. Even after the fixed-dividend framework ends, the bank believes the utility's steady cash flows will allow it to return more money to shareholders.
The current framework was put in place when DEWA listed on the Dubai Financial Market in 2022, as part of the emirate's push to privatise state assets. Under that arrangement, the company committed to paying a set dividend each year through 2026, giving investors clarity on income.
Once that commitment expires, DEWA will have more flexibility to set its payout policy. BofA's forecast suggests the company will choose to increase, not cut, the dividend.
Profit forecasts trimmed
At the same time, BofA lowered its earnings forecasts for DEWA for 2026 and 2027. The bank did not specify the reasons in the brief, but utilities often face headwinds from higher financing costs, changes in fuel prices, or shifts in regulatory decisions.
This is a common pattern for analysts: they may trim profit expectations while still seeing room for dividend growth, especially if the company generates strong cash flow. Dividends are paid from cash, not just accounting profit, so a utility with stable cash generation can often maintain or increase payouts even if earnings dip slightly.
For investors, the key takeaway is that BofA sees DEWA's dividend as sustainable and likely to grow, even if its profit growth slows.
What it means for investors
For everyday investors, DEWA is often viewed as an income stock — a company that pays regular, relatively predictable dividends. Utilities like DEWA are typically less volatile than tech or consumer stocks, making them attractive to people seeking steady returns.
A 4.9% dividend yield is notably higher than what many global utilities offer. For comparison, the average dividend yield on the S&P 500 is around 1.3%, though utilities in other markets can pay more. The yield also reflects the stock's price, so if DEWA's share price rises, the yield would fall.
Investors should remember that dividends are never guaranteed. Companies can cut or suspend payouts if business conditions deteriorate. However, for a regulated utility with a government backer, the risk is generally lower than for companies in cyclical industries.
BofA's note also highlights a broader theme: as the 2026 framework nears its end, DEWA's board will have to decide how to balance returning cash to shareholders with funding future investments in Dubai's expanding energy and water infrastructure.
The emirate has ambitious growth plans, including new data centres and industrial projects, which will require more electricity and water. That could put pressure on DEWA to retain more cash for capital spending, potentially limiting dividend growth.
Still, BofA's analysts believe the company can do both — invest for growth and raise the dividend. If they are right, income-focused investors could see a welcome increase in 2027.
For now, the market will be watching DEWA's next earnings reports and any guidance from management about its post-2026 dividend policy. Until then, the 10% hike remains a forecast, not a promise.
