Stock Analysis

UMS Holdings (SGX:558) Is Increasing Its Dividend To SGD0.022

SGX:558
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UMS Holdings Limited (SGX:558) will increase its dividend from last year's comparable payment on the 23rd of May to SGD0.022. This makes the dividend yield about the same as the industry average at 4.1%.

See our latest analysis for UMS Holdings

UMS Holdings' Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend was quite comfortably covered by UMS Holdings' earnings, but it was a bit tighter on the cash flow front. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Looking forward, earnings per share is forecast to rise by 48.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 47%, which is in the range that makes us comfortable with the sustainability of the dividend.

historic-dividend
SGX:558 Historic Dividend April 14th 2024

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was SGD0.0256, compared to the most recent full-year payment of SGD0.056. This implies that the company grew its distributions at a yearly rate of about 8.1% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. UMS Holdings might have put its house in order since then, but we remain cautious.

The Dividend Has Growth Potential

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 UMS Holdings has grown earnings per share at 5.6% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments UMS Holdings has been making. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for UMS Holdings that investors should take into consideration. 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.