Ultimate Products (LON:ULTP) Has Announced A Dividend Of £0.0215

Ultimate Products Plc (LON:ULTP) has announced that it will pay a dividend of £0.0215 per share on the 30th of January. The dividend yield of 6.0% is still a nice boost to shareholder returns, despite the cut.

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Ultimate Products' Future Dividend Projections Appear Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Ultimate Products was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

EPS is set to fall by 3.8% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 62%, which we are pretty comfortable with and we think is feasible on an earnings basis.

View our latest analysis for Ultimate Products

Ultimate Products' Dividend Has Lacked Consistency

Ultimate Products has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of £0.0324 in 2016 to the most recent total annual payment of £0.037. This implies that the company grew its distributions at a yearly rate of about 1.5% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Ultimate Products May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Ultimate Products has seen earnings per share falling at 3.8% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Our Thoughts On Ultimate Products' Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Ultimate Products is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 3 warning signs for Ultimate Products that investors need to be conscious of moving forward. Is Ultimate Products not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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