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Uni-Asia Group Limited (SGX:CHJ) will pay a dividend of $0.02 on the 30th of May. Despite the cut, the dividend yield of 3.7% will still be comparable to other companies in the industry.
Uni-Asia Group Might Find It Hard To Continue The Dividend
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Uni-Asia Group is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.
Over the next year, EPS might fall by 6.9% based on recent performance. This means that the company won't turn a profit over the next year, but with healthy cash flows at the moment the dividend could still be okay to continue.
View our latest analysis for Uni-Asia Group
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was $0.03, compared to the most recent full-year payment of $0.0222. The dividend has shrunk at around 3.0% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
Dividend Growth Is Doubtful
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. Uni-Asia Group has seen earnings per share falling at 6.9% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.
The Dividend Could Prove To Be Unreliable
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. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Uni-Asia Group (of which 1 is concerning!) you should know about. Is Uni-Asia Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.