United Malt Group (ASX:UMG) Has Affirmed Its Dividend Of AU$0.035

By
Simply Wall St
Published
November 19, 2021
ASX:UMG
Source: Shutterstock

The board of United Malt Group Limited (ASX:UMG) has announced that it will pay a dividend on the 17th of December, with investors receiving AU$0.035 per share. The dividend yield is 1.3% based on this payment, which is a little bit low compared to the other companies in the industry.

Check out our latest analysis for United Malt Group

United Malt Group's Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, United Malt Group's profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 25%, which is in a comfortable range for us.

historic-dividend
ASX:UMG Historic Dividend November 19th 2021

United Malt Group Doesn't Have A Long Payment History

It's not possible for us to make a backward looking judgement just based on a short payment history. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Has Limited Growth Potential

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. EPS has fallen over the last year, with this year's number 73% below last year. Decreases in earnings as large as this could start to put some pressure on the dividend if they are sustained for several years. However, we would never make any decisions based on only a single year of data, especially when assessing long term dividend potential.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

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. Taking the debate a bit further, we've identified 3 warning signs for United Malt Group that investors need to be conscious of moving forward. We have also put together a list of global stocks with a solid dividend.

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