Stock Analysis

UMS Holdings' (SGX:558) Dividend Will Be SGD0.012

SGX:558
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UMS Holdings Limited's (SGX:558) investors are due to receive a payment of SGD0.012 per share on 26th of October. This means the dividend yield will be fairly typical at 4.5%.

Check out our latest analysis for UMS Holdings

UMS Holdings' Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, prior to this announcement, UMS Holdings was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

Looking forward, earnings per share is forecast to rise by 0.09% over the next year. If the dividend continues on this path, the payout ratio could be 42% by next year, which we think can be pretty sustainable going forward.

historic-dividend
SGX:558 Historic Dividend August 16th 2023

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the dividend has gone from SGD0.0307 total annually to SGD0.05. This works out to be a compound annual growth rate (CAGR) of approximately 5.0% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

We Could See UMS Holdings' Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that UMS Holdings has been growing its earnings per share at 9.6% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for UMS Holdings' prospects of growing its dividend payments in the future.

Our Thoughts On UMS Holdings' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about UMS Holdings' payments, as there could be some issues with sustaining them into the future. While UMS Holdings is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for UMS Holdings that investors should take into consideration. Is UMS Holdings 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.