United Malacca Berhad (KLSE:UMCCA) Is About To Go Ex-Dividend, And It Pays A 2.4% Yield

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that United Malacca Berhad (KLSE:UMCCA) is about to go ex-dividend in just 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Meaning, you will need to purchase United Malacca Berhad's shares before the 18th of January to receive the dividend, which will be paid on the 31st of January.

The company's upcoming dividend is RM0.05 a share, following on from the last 12 months, when the company distributed a total of RM0.12 per share to shareholders. Calculating the last year's worth of payments shows that United Malacca Berhad has a trailing yield of 2.4% on the current share price of MYR5. 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! So we need to investigate whether United Malacca Berhad can afford its dividend, and if the dividend could grow.

Check out our latest analysis for United Malacca Berhad

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. United Malacca Berhad paid out 67% of its earnings to investors last year, a normal payout level for most businesses. 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 81% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see United Malacca Berhad earnings per share are up 8.4% per annum over the last five years. Decent historical earnings per share growth suggests United Malacca Berhad has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. United Malacca Berhad's dividend payments per share have declined at 5.4% per year on average over the past 10 years, which is uninspiring. United Malacca Berhad is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

Final Takeaway

Is United Malacca Berhad an attractive dividend stock, or better left on the shelf? Earnings per share growth has been unremarkable, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear excessive. In summary, it's hard to get excited about United Malacca Berhad from a dividend perspective.

With that being said, if dividends aren't your biggest concern with United Malacca Berhad, you should know about the other risks facing this business. Case in point: We've spotted 2 warning signs for United Malacca Berhad 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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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.