UOB-Kay Hian Holdings (SGX:U10) Will Pay A Larger Dividend Than Last Year At SGD0.119
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If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, UOB-Kay Hian Holdings' earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.
Over the next year, EPS could expand by 23.1% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 44% by next year, which is in a pretty sustainable range.
Check out our latest analysis for UOB-Kay Hian Holdings
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was SGD0.05 in 2015, and the most recent fiscal year payment was SGD0.119. This means that it has been growing its distributions at 9.1% per annum over that time. 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.
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. UOB-Kay Hian Holdings has seen EPS rising for the last five years, at 23% 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 UOB-Kay Hian Holdings could prove to be a strong dividend payer.
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While UOB-Kay Hian Holdings is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.
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. Case in point: We've spotted 2 warning signs for UOB-Kay Hian Holdings (of which 1 shouldn't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.
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