UBM Development's (VIE:UBS) Upcoming Dividend Will Be Larger Than Last Year's

By
Simply Wall St
Published
May 09, 2022
WBAG:UBS
Source: Shutterstock

UBM Development AG (VIE:UBS) has announced that it will be increasing its dividend on the 23rd of May to €2.25. This will take the dividend yield from 5.5% to 5.5%, providing a nice boost to shareholder returns.

See our latest analysis for UBM Development

UBM Development's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, UBM Development was earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

The next year is set to see EPS grow by 14.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 47%, which is in the range that makes us comfortable with the sustainability of the dividend.

historic-dividend
WBAG:UBS Historic Dividend May 9th 2022

UBM Development Has A Solid Track Record

The company has an extended history of paying stable dividends. The first annual payment during the last 10 years was €0.55 in 2012, and the most recent fiscal year payment was €2.25. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings has been rising at 2.9% per annum over the last five years, which admittedly is a bit slow. UBM Development is struggling to find viable investments, so it is returning more to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On UBM Development's Dividend

Overall, we always like to see the dividend being raised, but we don't think UBM Development will make a great income stock. While UBM Development is earning enough to cover the payments, the cash flows are lacking. We don't think UBM Development is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. To that end, UBM Development has 3 warning signs (and 1 which can't be ignored) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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