UMP Healthcare Holdings (HKG:722) Is Due To Pay A Dividend Of HK$0.02

UMP Healthcare Holdings Limited (HKG:722) will pay a dividend of HK$0.02 on the 10th of January. However, the dividend yield of 7.3% is still a decent boost to shareholder returns.

Check out our latest analysis for UMP Healthcare Holdings

UMP Healthcare Holdings' Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, UMP Healthcare Holdings' dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 24.4% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 56%, which is in the range that makes us comfortable with the sustainability of the dividend.

UMP Healthcare Holdings' Dividend Has Lacked Consistency

Looking back, UMP Healthcare Holdings' dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2016, the dividend has gone from HK$0.02 total annually to HK$0.033. This implies that the company grew its distributions at a yearly rate of about 6.5% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. UMP Healthcare Holdings has seen EPS rising for the last five years, at 24% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that UMP Healthcare Holdings could prove to be a strong dividend payer.

We Really Like UMP Healthcare Holdings' Dividend

Overall, we think that UMP Healthcare Holdings could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 5 warning signs for UMP Healthcare Holdings you should be aware of, and 1 of them is a bit concerning. Is UMP Healthcare 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.