Uju Holding Limited (HKG:1948) has announced that on 2nd of July, it will be paying a dividend ofCN¥0.04, which a reduction from last year's comparable dividend. This means that the annual payment is 4.0% of the current stock price, which is lower than what the rest of the industry is paying.
Our free stock report includes 3 warning signs investors should be aware of before investing in Uju Holding. Read for free now.Uju Holding's Payment Could Potentially Have Solid Earnings Coverage
If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Uju Holding's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.
If the company can't turn things around, EPS could fall by 67.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 78%, which is definitely on the higher side.
See our latest analysis for Uju Holding
Uju Holding's Dividend Has Lacked Consistency
Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The dividend has gone from an annual total of CN¥0.0811 in 2022 to the most recent total annual payment of CN¥0.0373. This works out to a decline of approximately 54% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
Dividend Growth Potential Is Shaky
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Uju Holding's EPS has fallen by approximately 68% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.
In Summary
Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. 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.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Uju Holding (1 doesn't sit too well with us!) that you should be aware of before investing. Is Uju Holding not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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.