UOB-Kay Hian Holdings (SGX:U10) will pay a lower dividend than last year

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UOB-Kay Hian Holdings Limited (SGX:U10) cuts its dividend to S$0.088 on June 21. The 5.4% dividend yield is still a good boost to shareholder returns, despite the cut.

See our latest analysis for UOB-Kay Hian Holdings

UOB-Kay Hian Holdings revenue easily covers distributions

If the payouts aren’t sustainable, a high return for a few years won’t matter much. The last payment was quite easily covered by income, but it represented 122% of cash flow. While the company may be more focused on returning cash to shareholders than growing the business at this time, we believe that such a high cash payout ratio could expose the dividend to a reduction if the company was having difficulties.

Over the next year, EPS could rise 19.3% if recent trends continue. If the dividend continues on this path, the payout ratio could be 47% by next year, which we believe can be quite sustainable in the future.

SGX:U10 Historic dividend April 28, 2022

Dividend volatility

The company’s dividend history has been marked by instability, with at least 1 cut in the past 10 years. The first annual payment in the past 10 years was S$0.065 in 2012, and the most recent year’s payment was S$0.088. This equates to a compound annual growth rate (CAGR) of approximately 3.1% per year during this period. The dividend has had some fluctuations in the past, so even though the dividend has been increased this year, we have to remember that it has been reduced in the past.

The dividend should increase

With a relatively unstable dividend, it is even more important to see if earnings per share increase. UOB-Kay Hian Holdings has seen EPS rise over the past five years, at 19% annually. The company pays out a lot of its money as a dividend, but that seems fair given the payout ratio.

Our thoughts on the UOB-Kay Hian Holdings dividend

In summary, cutting dividends isn’t ideal, but it can bring the payout back into a more sustainable range. Although the low payout ratio is a redeeming feature, this is offset by the minimum cash to cover payouts. We would be a bit cautious to rely on this stock primarily for dividend income.

It is important to note that companies with a consistent dividend policy will generate greater investor confidence than those with an erratic one. However, there are other things for investors to consider when analyzing stock performance. For example, we chose 2 warning signs for UOB-Kay Hian Holdings that investors should be aware of before committing capital to this security. Looking for more high yield dividend ideas? Try our collection of strong dividend payers.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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