UTS Marketing Solutions Holdings' (HKG:6113) Upcoming Dividend Will Be Larger Than Last Year's

The board of UTS Marketing Solutions Holdings Limited (HKG:6113) has announced that it will be increasing its dividend on the 23rd of September to HK$0.06. This makes the dividend yield 8.1%, which is above the industry average.

Check out our latest analysis for UTS Marketing Solutions Holdings

UTS Marketing Solutions Holdings' Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. UTS Marketing Solutions Holdings is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS could expand by 362.3% if trends from the past few years continue. If the dividend extends its recent trend, estimates say the dividend could reach 45%, which is in a pretty sustainable range.

UTS Marketing Solutions Holdings' Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. Since 2017, the first annual payment was RM0.02, compared to the most recent full-year payment of RM0.045. This means that it has been growing its distributions at 22% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. UTS Marketing Solutions Holdings has seen EPS rising for the last five years, at 362% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

In Summary

Overall, we always like to see the dividend being raised, but we don't think UTS Marketing Solutions Holdings will make a great income stock. While UTS Marketing Solutions Holdings is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Taking the debate a bit further, we've identified 2 warning signs for UTS Marketing Solutions Holdings 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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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.
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