UOB-Kay Hian Holdings (SGX:U10) Will Pay A Smaller Dividend Than Last Year

UOB-Kay Hian Holdings Limited (SGX:U10) is reducing its dividend to S$0.088 on the 21st of June. The dividend yield of 5.4% is still a nice boost to shareholder returns, despite the cut.

See our latest analysis for UOB-Kay Hian Holdings

UOB-Kay Hian Holdings' Earnings Easily Cover the Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last payment was quite easily covered by earnings, but it made up 122% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS could expand by 19.3% if recent trends continue. If the dividend continues on this path, the payout ratio could be 47% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The first annual payment during the last 10 years was S$0.065 in 2012, and the most recent fiscal year payment was S$0.088. This works out to be a compound annual growth rate (CAGR) of approximately 3.1% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. UOB-Kay Hian Holdings has seen EPS rising for the last five years, at 19% per annum. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

Our Thoughts On UOB-Kay Hian Holdings' Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for UOB-Kay Hian Holdings that investors should know about before committing capital to this stock. 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.