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Emaar Properties PJSC surged in Dubai trading to the highest in 6 weeks after agreeing to the investor demands for the first dividend payout since 2008.

Emaar, builder of the world’s tallest tower in Dubai, rose as much as 4.4 percent and were trading 2.5 percent higher at 3.26 dirhams as of 11:32 a.m. in Dubai. Investors yesterday approved a cash dividend for 2010 equal to ten percent of the stock’s par value of 1 dirham a share, for a total of about 600 million dirhams ($163 million).

“It’s good for retail-investor sentiment, but I’m not sure it’s the wise thing to do,” said Fadi Al Said, a senior manager at ING Investment Management in Dubai, which oversees about $518 billion worldwide. “I prefer Emaar keeps its cash to help meet obligations rather than maybe going to the market later.”

ING Investment didn’t expect a dividend payout, he said.

Emaar Chairman Mohamed Alabbar, who had not initially proposed a dividend, told shareholders at the general assembly meeting that a payout may leave the company ill-prepared to face emergencies. Investors had demanded as much as 30 percent in cash.

“If we pay what you're asking of us, we would be in automatic default and we'd breach our covenants with banks, which stipulate the company’s needed cash position and other requirements” Alabbar said at a three-hour meeting that saw heated exchanges between shareholders and executives.

Shareholders rejected his proposal to pay a 500 million- dirham cash dividend and a five percent bonus share with a total value of 1.4 billion dirhams, before agreeing to the 10 percent payout.

Emaar, which spearheaded Dubai’s construction boom along with Nakheel PJSC, reported fourth-quarter profit that missed analyst estimates on writedowns related to troubled lenders Amlak Finance PJSC and Dubai Bank. Annual earnings rose to 2.45 billion dirhams from 327 billion dirhams in 2009 as the company handed over apartments in the 200-story Burj Khalifa.

“I think Emaar’s management went to the meeting ready to bargain, and this may be interpreted as a positive signal that the company is positive on the future,” said Al Said, whose fund has an “overweight” rating on the stock. “Emaar’s hospitality and retail units are doing well and the dividend payment isn’t an amount that will break the company,” he said.

Emaar said in January that it sold $500 million in Islamic bonds, and the company raised the same amount in December to repay short-term loans. The developer plans to raise $2 billion in total. The developer has 3.7 billion dirhams in debt due next year, Bloomberg data shows. It's an additional 3.85 billion dirhams due in 2016.