Universal Music Group (AMS:UMG) Has Affirmed Its Dividend Of €0.24

Universal Music Group N.V. (AMS:UMG) has announced that it will pay a dividend of €0.24 per share on the 28th of October. This means the annual payment is 2.1% of the current stock price, which is above the average for the industry.

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Universal Music Group's Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, Universal Music Group's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 25.1% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 51%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

View our latest analysis for Universal Music Group

Universal Music Group's Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. The annual payment during the last 4 years was €0.40 in 2021, and the most recent fiscal year payment was €0.52. This means that it has been growing its distributions at 6.8% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Universal Music Group has seen EPS rising for the last five years, at 14% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Universal Music Group Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Universal Music Group might even raise payments in the future. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. 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. To that end, Universal Music Group has 2 warning signs (and 1 which is potentially serious) we think you should know about. 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.