UWM Holdings Corporation (NYSE:UWMC) will pay a dividend of $0.10 on the 10th of October. This means the annual payment is 9.9% of the current stock price, which is above the average for the industry.
UWM Holdings Will Pay Out More Than It Is Earning
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.
UWM Holdings has a short history of paying out dividends, with its current track record at only 2 years. Diving into the company's earnings report, the payout ratio is set at 53%, which is a decent ratio of dividend payout to earnings, and may sustain future dividends if the company stays at its current trend.
EPS is set to fall by 34.4% over the next 3 years. Additionally, analysts forecast the payout ratio to be at 122% over the same time period, which could put the dividend in jeopardy if the company's earnings don't improve.
UWM Holdings Is Still Building Its Track Record
The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. There hasn't been much of a change in the dividend over the last 2 years. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.
Dividend Growth Potential Is Shaky
The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Over the last year, UWM Holdings' EPS has fallen by 97%. Reduced dividend payments are a common consequence of declining earnings. We do note though, one year is too short a time to be drawing strong conclusions about a company's future prospects.
Our Thoughts On UWM Holdings' Dividend
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. 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. To that end, UWM Holdings has 3 warning signs (and 1 which can't be ignored) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
What are the risks and opportunities for UWM Holdings?
Trading at 73.8% below our estimate of its fair value
Earnings are forecast to decline by an average of 40% per year for the next 3 years
Profit margins (2.5%) are lower than last year (31.4%)
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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.
UWM Holdings Corporation engages in the residential mortgage lending business in the United States.
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Fair value second-rate dividend payer.