UMS Holdings' (SGX:558) Upcoming Dividend Will Be Larger Than Last Year's

The board of UMS Holdings Limited (SGX:558) has announced that it will be paying its dividend of SGD0.022 on the 23rd of May, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 4.3%.

View our latest analysis for UMS Holdings

UMS Holdings' Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. UMS Holdings was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Over the next year, EPS is forecast to expand by 48.3%. If the dividend continues on this path, the payout ratio could be 47% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of SGD0.0256 in 2014 to the most recent total annual 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.

UMS Holdings Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. UMS Holdings has seen EPS rising for the last five years, at 5.6% per annum. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

In Summary

Overall, we always like to see the dividend being raised, but we don't think UMS Holdings will make a great income stock. 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.

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. As an example, we've identified 2 warning signs 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.