UMP Healthcare Holdings (HKG:722) Is Paying Out A Larger Dividend Than Last Year

UMP Healthcare Holdings Limited (HKG:722) will increase its dividend on the 8th of April to HK$0.015, which is 50% higher than last year. This makes the dividend yield 5.0%, 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. The last dividend was quite easily covered by UMP Healthcare Holdings' earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 72.5% if recent trends continue. If the dividend continues on this path, the payout ratio could be 60% 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. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the dividend has gone from HK$0.02 to HK$0.038. This works out to be a compound annual growth rate (CAGR) of approximately 14% 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 Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see UMP Healthcare Holdings has been growing its earnings per share at 72% a year over the past five years. UMP Healthcare Holdings is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

We Really Like UMP Healthcare Holdings' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 5 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.