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UP Global Sourcing Holdings plc (LON:UPGS) is about to trade ex-dividend in the next 4 days. You will need to purchase shares before the 31st of December to receive the dividend, which will be paid on the 29th of January.
UP Global Sourcing Holdings's next dividend payment will be UK£0.028 per share, and in the last 12 months, the company paid a total of UK£0.041 per share. Based on the last year's worth of payments, UP Global Sourcing Holdings stock has a trailing yield of around 3.5% on the current share price of £1.12. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see UP Global Sourcing Holdings paying out a modest 47% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 15% of its free cash flow as dividends last year, which is conservatively low.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at UP Global Sourcing Holdings, with earnings per share up 5.3% on average over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past four years, UP Global Sourcing Holdings has increased its dividend at approximately 5.1% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Should investors buy UP Global Sourcing Holdings for the upcoming dividend? Earnings per share have been growing moderately, and UP Global Sourcing Holdings is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and UP Global Sourcing Holdings is halfway there. There's a lot to like about UP Global Sourcing Holdings, and we would prioritise taking a closer look at it.
On that note, you'll want to research what risks UP Global Sourcing Holdings is facing. To help with this, we've discovered 1 warning sign for UP Global Sourcing Holdings that you should be aware of before investing in their shares.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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.
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