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

UMP Healthcare Holdings Limited's (HKG:722) dividend will be increasing from last year's payment of the same period to HK$0.03 on 27th of January. This makes the dividend yield 5.6%, which is above the industry average.

View our latest analysis for UMP Healthcare Holdings

UMP Healthcare Holdings' Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last dividend, UMP Healthcare Holdings is earning enough to cover the payment, but then it makes up 148% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

If the trend of the last few years continues, EPS will grow by 8.6% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 50%, which is in the range that makes us comfortable with the sustainability of the dividend.

UMP Healthcare Holdings' Dividend Has Lacked Consistency

Looking back, UMP Healthcare Holdings' dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 6 years was HK$0.02 in 2016, and the most recent fiscal year payment was HK$0.045. This means that it has been growing its distributions at 14% per annum 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.

UMP Healthcare Holdings Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. UMP Healthcare Holdings has seen EPS rising for the last five years, at 8.6% per annum. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On UMP Healthcare Holdings' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While UMP Healthcare Holdings is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

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 picked out 3 warning signs for UMP Healthcare Holdings that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.