Universal Music Group (AMS:UMG) Is Increasing Its Dividend To €0.28

Universal Music Group N.V. (AMS:UMG) has announced that it will be increasing its dividend from last year's comparable payment on the 13th of June to €0.28. This makes the dividend yield 1.9%, which is above the industry average.

Our free stock report includes 2 warning signs investors should be aware of before investing in Universal Music Group. Read for free now.

Universal Music Group's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Universal Music Group's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to fall by 7.9%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 56%, which is comfortable for the company to continue 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. Since 2021, the annual payment back then was €0.40, compared to the most recent full-year payment of €0.52. This implies that the company grew its distributions at a yearly rate of about 6.8% 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 Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Universal Music Group has grown earnings per share at 16% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

We Really Like Universal Music Group's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. 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. All of these factors considered, we think this has solid potential as a dividend stock.

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. To that end, Universal Music Group has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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