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

The board of UMP Healthcare Holdings Limited (HKG:722) has announced that it will pay a dividend of HK$0.03 per share on the 5th of January. The dividend yield will be 7.6% based on this payment which is still above the industry average.

See our latest analysis for UMP Healthcare Holdings

UMP Healthcare Holdings' Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, UMP Healthcare Holdings was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS could expand by 8.4% if recent trends continue. 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

Even in its relatively short history, the company has reduced the dividend at least once. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2016, the dividend has gone from HK$0.02 total annually to HK$0.047. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Has 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. UMP Healthcare Holdings has seen EPS rising for the last five years, at 8.4% per annum. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

UMP Healthcare Holdings Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think UMP Healthcare Holdings might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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.

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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.