UMP Healthcare Holdings (HKG:722) Is Increasing Its Dividend To HK$0.03

UMP Healthcare Holdings Limited (HKG:722) will increase its dividend from last year's comparable payment on the 27th of January to HK$0.03. This will take the dividend yield to an attractive 6.1%, providing a nice boost to shareholder returns.

Check out our latest analysis for UMP Healthcare Holdings

UMP Healthcare Holdings' Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite easily covered by UMP Healthcare Holdings' earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

If the trend of the last few years continues, EPS will grow by 13.0% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 74%, which is in the range that makes us comfortable with the sustainability of the dividend.

UMP Healthcare Holdings' Dividend Has Lacked Consistency

UMP Healthcare Holdings has been paying dividends for a while, but the track record isn't stellar. 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$0.045. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. 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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. UMP Healthcare Holdings has impressed us by growing EPS at 13% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

We Really Like UMP Healthcare Holdings' Dividend

Overall, a dividend increase is always good, and we think that UMP Healthcare Holdings is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 3 warning signs for UMP Healthcare Holdings that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.