It Might Not Be A Great Idea To Buy UWM Holdings Corporation (NYSE:UWMC) For Its Next Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see UWM Holdings Corporation (NYSE:UWMC) is about to trade ex-dividend in the next four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase UWM Holdings' shares on or after the 19th of March will not receive the dividend, which will be paid on the 11th of April.
The company's next dividend payment will be US$0.10 per share, on the back of last year when the company paid a total of US$0.40 to shareholders. Based on the last year's worth of payments, UWM Holdings stock has a trailing yield of around 5.8% on the current share price of US$6.91. If you buy this business for its dividend, you should have an idea of whether UWM Holdings's dividend is reliable and sustainable. So we need to investigate whether UWM Holdings can afford its dividend, and if the dividend could grow.
View our latest analysis for UWM Holdings
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. UWM Holdings reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. UWM Holdings was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last three years, making us wonder if the dividend is sustainable at all.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. UWM Holdings's dividend payments are effectively flat on where they were three years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.
We update our analysis on UWM Holdings every 24 hours, so you can always get the latest insights on its financial health, here.
The Bottom Line
Should investors buy UWM Holdings for the upcoming dividend? It's hard to get past the idea of UWM Holdings paying a dividend despite reporting a loss over the past year - especially when the general trend in its earnings also looks to be negative. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.
With that being said, if you're still considering UWM Holdings as an investment, you'll find it beneficial to know what risks this stock is facing. Be aware that UWM Holdings is showing 2 warning signs in our investment analysis, and 1 of those doesn't sit too well with us...
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.
