There's A Lot To Like About Yancoal Australia's (ASX:YAL) Upcoming AU$0.70 Dividend

By
Simply Wall St
Published
March 10, 2022
ASX:YAL
Source: Shutterstock

Yancoal Australia Ltd (ASX:YAL) is about to trade ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Yancoal Australia's shares before the 15th of March in order to be eligible for the dividend, which will be paid on the 29th of April.

The upcoming dividend for Yancoal Australia is AU$0.70 per share, increased from last year's total dividends per share of AU$0.50. If you buy this business for its dividend, you should have an idea of whether Yancoal Australia's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Yancoal Australia

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. It paid out 83% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. It could become a concern if earnings started to decline.

Click here to see how much of its profit Yancoal Australia paid out over the last 12 months.

historic-dividend
ASX:YAL Historic Dividend March 10th 2022

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Yancoal Australia's earnings have been skyrocketing, up 44% per annum for the past five years. Earnings per share are growing at a rapid rate, yet the company is paying out more than three-quarters of its earnings.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Yancoal Australia has delivered 25% dividend growth per year on average over the past four years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Should investors buy Yancoal Australia for the upcoming dividend? Yancoal Australia has an acceptable payout ratio and its earnings per share have been improving at a decent rate. Yancoal Australia ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

So while Yancoal Australia looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Case in point: We've spotted 2 warning signs for Yancoal Australia you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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