28-02-2025
UEM Sunrise Berhad (KLSE:UEMS) Will Pay A Larger Dividend Than Last Year At MYR0.0124
The board of UEM Sunrise Berhad (KLSE:UEMS) has announced that the dividend on 19th of May will be increased to MYR0.0124, which will be 65% higher than last year's payment of MYR0.0075 which covered the same period. This takes the annual payment to 1.3% of the current stock price, which unfortunately is below what the industry is paying.
Check out our latest analysis for UEM Sunrise Berhad
If it is predictable over a long period, even low dividend yields can be attractive. The last dividend was quite easily covered by UEM Sunrise Berhad's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Looking forward, earnings per share is forecast to rise by 45.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 36% by next year, which is in a pretty sustainable range.
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the annual payment back then was MYR0.04, compared to the most recent full-year payment of MYR0.0124. This works out to a decline of approximately 69% over that time. A company that decreases its dividend over time generally isn't what we are looking for.
Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Over the past five years, it looks as though UEM Sunrise Berhad's EPS has declined at around 16% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. 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.
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. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. Very few businesses see earnings consistently shrink year after year in perpetuity though, and so it might be worth seeing what the 7 analysts we track are forecasting for the future. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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