UMP Healthcare Holdings (HKG:722) Is Due To Pay A Dividend Of HK$0.03

UMP Healthcare Holdings Limited (HKG:722) will pay a dividend of HK$0.03 on the 5th of January. This means the annual payment is 6.9% of the current stock price, which is above the average for the industry.

View our latest analysis for UMP Healthcare Holdings

UMP Healthcare Holdings' Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, UMP Healthcare 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.

Looking forward, earnings per share could rise by 8.4% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 63% by next year, which we think can be pretty sustainable going forward.

UMP Healthcare Holdings' Dividend Has Lacked Consistency

Looking back, UMP Healthcare Holdings' dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2016, the annual payment back then was HK$0.02, compared to the most recent full-year payment of HK$0.047. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. UMP Healthcare Holdings has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

We Could See UMP Healthcare Holdings' Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that UMP Healthcare Holdings has grown earnings per share at 8.4% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

We Really Like UMP Healthcare Holdings' Dividend

Overall, we like to see the dividend staying consistent, and we think UMP Healthcare Holdings might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. As an example, we've identified 3 warning signs for UMP Healthcare Holdings 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.