Yahoo Finance Universal Music Group (AMS:UMG) Is Paying Out A Dividend Of €0.27
Universal Music Group N.V. (AMS:UMG) has announced that it will pay a dividend of €0.27 per share on the 11th of June. This makes the dividend yield 1.9%, which will augment investor returns quite nicely.
Check out our latest analysis for Universal Music Group
Universal Music Group's Payment Has Solid Earnings Coverage
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before this announcement, Universal Music Group was paying out 74% of earnings, but a comparatively small 53% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.
Over the next year, EPS is forecast to expand by 49.9%. If the dividend continues on this path, the payout ratio could be 49% by next year, which we think can be pretty sustainable going forward.
Universal Music Group's Dividend Has Lacked Consistency
Even in its short history, we have seen the dividend cut. The annual payment during the last 2 years was €0.40 in 2022, and the most recent fiscal year payment was €0.51. This means that it has been growing its distributions at 13% per annum over that time. Universal Music Group has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
We Could See Universal Music Group's Dividend Growing
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. Universal Music Group has seen EPS rising for the last five years, at 6.9% per annum. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.
Our Thoughts On Universal Music Group's Dividend
In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Universal Music Group that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
