UMP Healthcare Holdings (HKG:722) Has Announced A Dividend Of HK$0.014

UMP Healthcare Holdings Limited's (HKG:722) investors are due to receive a payment of HK$0.014 per share on 11th of April. This takes the dividend yield to 7.8%, which shareholders will be pleased with.

Check out our latest analysis for UMP Healthcare Holdings

UMP Healthcare Holdings' Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, UMP Healthcare Holdings' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, could fall by 11.6% if the company can't turn things around from the last few years. If recent patterns in the dividend continue, we could see the payout ratio reaching 75% in the next 12 months which is on the higher end of the range we would say is sustainable.

UMP Healthcare Holdings' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 8 years was HK$0.02 in 2017, and the most recent fiscal year payment was HK$0.033. This works out to be a compound annual growth rate (CAGR) of approximately 6.5% a year over that time. 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.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been sinking by 12% 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.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 3 warning signs for UMP Healthcare Holdings (1 is potentially serious!) that you should be aware of before investing. 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.