UP Global Sourcing Holdings' (LON:UPGS) Shareholders Will Receive A Bigger Dividend Than Last Year

UP Global Sourcing Holdings plc (LON:UPGS) has announced that it will be increasing its dividend on the 28th of January to UK£0.033. This makes the dividend yield 2.5%, which is above the industry average.

Check out our latest analysis for UP Global Sourcing Holdings

UP Global Sourcing Holdings' Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, UP Global Sourcing Holdings' dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS could expand by 5.3% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 64% by next year, which is in a pretty sustainable range.

UP Global Sourcing Holdings' Dividend Has Lacked Consistency

Looking back, UP Global Sourcing Holdings' dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from UK£0.032 in 2016 to the most recent annual payment of UK£0.05. This works out to be a compound annual growth rate (CAGR) of approximately 9.2% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

We Could See UP Global Sourcing Holdings' Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see UP Global Sourcing Holdings has been growing its earnings per share at 5.3% a year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Our Thoughts On UP Global Sourcing Holdings' Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 UP Global Sourcing Holdings that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.