Yahoo Finance United Malt Group (ASX:UMG) Has Re-Affirmed Its Dividend Of AU$0.035
United Malt Group Limited's (ASX:UMG) investors are due to receive a payment of AU$0.035 per share on 17th of December. Including this payment, the dividend yield on the stock will be 1.3%, which is a modest boost for shareholders' returns.
Check out our latest analysis for United Malt Group
United Malt Group's Dividend Is Well Covered By Earnings
If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, the company was paying out 119% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 36%. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.
Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 25%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.
United Malt Group Is Still Building Its Track Record
The company hasn't been paying a dividend for very long at all, so we can't really make a judgement on how stable the dividend has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.
The Dividend Has Limited Growth Potential
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. United Malt Group's earnings per share has fallen 73% over the past year. Decreases in earnings as large as this could start to put some pressure on the dividend if they are sustained for several years. We do note though, one year is too short a time to be drawing strong conclusions about a company's future prospects.
United Malt Group's Dividend Doesn't Look Sustainable
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about United Malt Group's payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 3 warning signs for United Malt Group that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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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