The advice of UMP Healthcare Holdings Limited (HKG: 722) announced that it will increase its dividend on January 26 to HK $ 0.028. This brings the dividend yield from 4.0% to 4.6%, which shareholders will be delighted with.
Check out our latest review for UMP Healthcare Holdings
UMP Healthcare Holdings payment has strong earnings coverage
While it’s great to have a strong dividend yield, we also need to determine if the payout is sustainable. Based on the last payment, UMP Healthcare Holdings was earning comfortably enough to cover the dividend. This means that a large portion of its profits are kept to grow the business.
If the trend of recent years continues, EPS will increase by 35.1% over the next 12 months. If the dividend continues according to recent trends, we estimate the payout ratio will be 66%, which is within the range that puts us at ease with the sustainability of the dividend.
UMP Healthcare Holdings dividend lacks consistency
It is heartwarming to see that UMP Healthcare Holdings has been paying a dividend for several years now, but it has been reduced at least once during that time. This suggests that the dividend might not be the most reliable. The dividend went from HK $ 0.02 in 2016 to the last annual payment of HK $ 0.033. This means that he increased his distributions by 11% per year during that period. It’s great to see strong growth in dividend payments, but the cuts are cause for concern as it may indicate that the payment policy is too ambitious.
The dividend seems likely to increase
Growth in earnings per share could be a mitigating factor considering past dividend fluctuations. UMP Healthcare Holdings has seen its EPS increase over the past five years, to 35% per year. The company has no problem growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock.
We really like the dividend from UMP Healthcare Holdings
Overall, we think it could be an attractive income stock, and it’s only getting better by paying a higher dividend this year. The company easily earns enough to cover its dividend payments and it’s great to see that those profits translate into cash flow. Overall, this ticks a lot of the boxes that we look for when choosing an income stock.
It is important to note that companies with a consistent dividend policy will generate greater investor confidence than those with an erratic policy. Still, there are a host of other factors that investors need to consider, aside from dividend payments, when analyzing a business. As an example, we have identified 3 warning signs for UMP Healthcare Holdings that you need to know before you invest. If you are a dividend investor, you can also view our curated list of high performing dividend stocks.
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