UMP Healthcare Holdings (HKG:722) Has Announced A Dividend Of HK$0.019

The board of UMP Healthcare Holdings Limited (HKG:722) has announced that it will pay a dividend of HK$0.019 per share on the 9th of January. The yield is still above the industry average at 6.8%.

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Estimates Indicate UMP Healthcare Holdings' Could Struggle to Maintain Dividend Payments In The Future

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last payment made up 83% of earnings, but cash flows were much higher. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

If the company can't turn things around, EPS could fall by 12.8% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 102%, which is definitely a bit high to be sustainable going forward.

See our latest analysis for UMP Healthcare Holdings

UMP Healthcare Holdings' Dividend Has Lacked Consistency

It's comforting to see that UMP Healthcare Holdings has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. The annual payment during the last 9 years was HK$0.02 in 2016, and the most recent fiscal year payment was HK$0.033. This implies that the company grew its distributions at a yearly rate of about 5.7% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. UMP Healthcare Holdings might have put its house in order since then, but we remain cautious.

The Dividend Has Limited Growth Potential

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. Earnings per share has been sinking by 13% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Our Thoughts On UMP Healthcare Holdings' 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 UMP Healthcare Holdings 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, UMP Healthcare Holdings has 3 warning signs (and 1 which can't be ignored) we think you should know about. Is UMP Healthcare Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.