UOA Development Bhd's (KLSE:UOADEV) Dividend Will Be MYR0.10

UOA Development Bhd (KLSE:UOADEV) has announced that it will pay a dividend of MYR0.10 per share on the 23rd of July. Based on this payment, the dividend yield on the company's stock will be 9.8%, which is an attractive boost to shareholder returns.

Check out our latest analysis for UOA Development Bhd

UOA Development Bhd Doesn't Earn Enough To Cover Its Payments

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

EPS is set to fall by 4.4% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could reach over 200%, which could put the dividend under pressure if earnings don't start to improve.

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 2014, the annual payment back then was MYR0.12, compared to the most recent full-year payment of MYR0.20. This implies that the company grew its distributions at a yearly rate of about 5.2% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Over the past five years, it looks as though UOA Development Bhd's EPS has declined at around 13% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

UOA Development Bhd's Dividend Doesn't Look Great

Overall, while some might be pleased that the dividend wasn't cut, we think this may help UOA Development Bhd make more consistent payments in the future. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, this doesn't get us very excited from an income standpoint.

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. Just as an example, we've come across 4 warning signs for UOA Development Bhd you should be aware of, and 2 of them are a bit unpleasant. 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.