Stock Analysis

UMS Holdings (SGX:558) Will Pay A Larger Dividend Than Last Year At SGD0.012

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UMS Holdings Limited (SGX:558) has announced that it will be increasing its periodic dividend on the 26th of October to SGD0.012, which will be 20% higher than last year's comparable payment amount of SGD0.01. Based on this payment, the dividend yield for the company will be 4.1%, which is fairly typical for the industry.

See our latest analysis for UMS Holdings

UMS Holdings' Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. But before making this announcement, UMS Holdings' earnings quite easily covered the dividend. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

Looking forward, earnings per share is forecast to fall by 5.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 44%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

SGX:558 Historic Dividend August 30th 2023

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the dividend has gone from SGD0.0307 total annually to SGD0.05. This implies that the company grew its distributions at a yearly rate of about 5.0% over that duration. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

We Could See UMS Holdings' Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. UMS Holdings has impressed us by growing EPS at 9.6% per 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

Overall, we always like to see the dividend being raised, but we don't think UMS Holdings will make a great income stock. While UMS Holdings is earning enough to cover the dividend, we are generally unimpressed with its future prospects. Overall, we don't think this company has the makings of a good income stock.

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. As an example, we've identified 1 warning sign for UMS Holdings that you should be aware of before investing. 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.