UMW Holdings Berhad's (KLSE:UMW) Upcoming Dividend Will Be Larger Than Last Year's

UMW Holdings Berhad (KLSE:UMW) has announced that it will be increasing its dividend on the 29th of April to RM0.058. Although the dividend is now higher, the yield is only 1.7%, which is below the industry average.

Check out our latest analysis for UMW Holdings Berhad

UMW Holdings Berhad's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. UMW Holdings Berhad is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS is forecast to expand by 15.0%. If the dividend continues on this path, the payout ratio could be 13% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2012, the first annual payment was RM0.30, compared to the most recent full-year payment of RM0.058. Dividend payments have fallen sharply, down 81% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

UMW Holdings Berhad Could Grow Its Dividend

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. It's encouraging to see UMW Holdings Berhad has been growing its earnings per share at 6.5% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for UMW Holdings Berhad's prospects of growing its dividend payments in the future.

Our Thoughts On UMW Holdings Berhad's Dividend

Overall, we always like to see the dividend being raised, but we don't think UMW Holdings Berhad will make a great income stock. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 13 UMW Holdings Berhad analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is UMW Holdings Berhad 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.