The board of UMS Holdings Limited (SGX:558) has announced that it will pay a dividend of SGD0.01 per share on the 16th of December. Based on this payment, the dividend yield will be 4.1%, which is fairly typical for the industry.
See our latest analysis for UMS Holdings
UMS Holdings' Payment Has Solid Earnings Coverage
Solid dividend yields are great, but they only really help us if the payment is sustainable. However, prior to this announcement, UMS Holdings' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 16.9% over the next year. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of SGD0.0307 in 2012 to the most recent total annual payment of SGD0.044. This works out to be a compound annual growth rate (CAGR) of approximately 3.7% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that UMS Holdings has been growing its earnings per share at 16% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
We Really Like UMS Holdings' Dividend
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign 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.