UMS Holdings (SGX:558) Is Paying Out A Larger Dividend Than Last Year

UMS Holdings Limited (SGX:558) will increase its dividend on the 23rd of May to SGD0.022, which is 10.0% higher than last year's payment from the same period of SGD0.02. The payment will take the dividend yield to 3.6%, which is in line with the average for the industry.

Check out our latest analysis for UMS Holdings

UMS Holdings' Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. The last dividend was quite comfortably covered by UMS Holdings' earnings, but it was a bit tighter on the cash flow front. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

The next year is set to see EPS grow by 51.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 46% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from SGD0.0256 total annually to SGD0.05. This works out to be a compound annual growth rate (CAGR) of approximately 6.9% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. UMS Holdings might have put its house in order since then, but we remain cautious.

UMS Holdings May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been crawling upwards at 3.0% per year. The company has been growing at a pretty soft 3.0% per annum, and is paying out quite a lot of its earnings to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think UMS Holdings' payments are rock solid. While UMS Holdings is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think UMS Holdings is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for UMS Holdings that investors should know about before committing capital to this stock. Is UMS Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.