Ultimate Products (LON:ULTP) Has Announced A Dividend Of £0.0245

The board of Ultimate Products Plc (LON:ULTP) has announced that it will pay a dividend of £0.0245 per share on the 28th of June. This takes the annual payment to 4.3% of the current stock price, which is about average for the industry.

See our latest analysis for Ultimate Products

Ultimate Products' Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Ultimate Products' dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 30.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 46%, which is in the range that makes us comfortable with the sustainability of the dividend.

Ultimate Products' Dividend Has Lacked Consistency

Ultimate Products has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of £0.0324 in 2017 to the most recent total annual payment of £0.074. This means that it has been growing its distributions at 13% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Ultimate Products has grown earnings per share at 15% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Ultimate Products Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Ultimate Products that investors should know about before committing capital to this stock. 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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