UWM Holdings Corporation (NYSE:UWMC) has announced that it will pay a dividend of $0.10 per share on the 10th of October. This makes the dividend yield 9.9%, which will augment investor returns quite nicely.
UWM Holdings Not Expected To Earn Enough To Cover Its Payments
A big dividend yield for a few years doesn't mean much if it can't be sustained.
UWM Holdings is just starting to establish itself as being able to pay dividends to shareholders, given its short 2-year history of distributing earnings. Diving into the company's earnings report, the payout ratio is set at 53%, which is a decent ratio of dividend payout to earnings, and may sustain future dividends if the company stays at its current trend.
EPS is set to fall by 34.4% over the next 3 years. Additionally, analysts forecast the payout ratio to be at 122% over the same time period, which could put the dividend in jeopardy if the company's earnings don't improve.
UWM Holdings Is Still Building Its Track Record
The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The last annual payment of $0.40 was flat on the annual payment from2 years ago. UWM Holdings hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.
Dividend Growth Potential Is Shaky
Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Over the last year, UWM Holdings' EPS has fallen by 97%. Decreases in earnings as large as this could start to put some pressure on the dividend if they are sustained for several years. We do note though, one year is too short a time to be drawing strong conclusions about a company's future prospects.
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While UWM Holdings is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, UWM Holdings has 3 warning signs (and 1 which can't be ignored) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of 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.
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