The board of Utah Medical Products, Inc. (NASDAQ:UTMD) has announced that it will pay a dividend on the 5th of October, with investors receiving US$0.28 per share. Based on this payment, the dividend yield on the company's stock will be 1.3%, which is an attractive boost to shareholder returns.
Utah Medical Products' Dividend Is Well Covered By Earnings
A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Utah Medical Products was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share could rise by 0.7% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 33% by next year, which we think can be pretty sustainable going forward.
Utah Medical Products Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2011, the first annual payment was US$0.94, compared to the most recent full-year payment of US$1.14. This implies that the company grew its distributions at a yearly rate of about 1.9% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
Dividend Growth May Be Hard To Achieve
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, Utah Medical Products' EPS was effectively flat over the past five years, which could stop the company from paying more every year. While EPS growth is quite low, Utah Medical Products has the option to increase the payout ratio to return more cash to shareholders.
We Really Like Utah Medical Products' Dividend
In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.
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. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Utah Medical Products stock. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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