UOB-Kay Hian Holdings Limited's (SGX:U10) dividend will be increasing from last year's payment of the same period to SGD0.119 on 26th of June. This will take the dividend yield to an attractive 7.1%, providing a nice boost to shareholder returns.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

UOB-Kay Hian Holdings' Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, UOB-Kay Hian Holdings was earning enough to cover the dividend, but it wasn't generating any free cash flows. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

If the trend of the last few years continues, EPS will grow by 23.1% over the next 12 months. If the dividend continues on this path, the payout ratio could be 44% by next year, which we think can be pretty sustainable going forward.

SGX:U10 Historic Dividend April 9th 2025

See our latest analysis for UOB-Kay Hian Holdings

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from SGD0.05 total annually to SGD0.119. This works out to be a compound annual growth rate (CAGR) of approximately 9.1% a year 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.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. UOB-Kay Hian Holdings has impressed us by growing EPS at 23% per year over the past five years. 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.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for UOB-Kay Hian Holdings you should be aware of, and 1 of them can't be ignored. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

UOBKH jumps 2.4% at 10:47 am, Apr 10th.