Yoong Onn Corporation Berhad (KLSE:YOCB) Passed Our Checks, And It's About To Pay A RM00.04 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Yoong Onn Corporation Berhad (KLSE:YOCB) is about to trade ex-dividend in the next four 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Yoong Onn Corporation Berhad's shares before the 18th of December in order to receive the dividend, which the company will pay on the 17th of January.

The company's next dividend payment will be RM00.04 per share. Last year, in total, the company distributed RM0.08 to shareholders. Looking at the last 12 months of distributions, Yoong Onn Corporation Berhad has a trailing yield of approximately 4.3% on its current stock price of RM01.84. If you buy this business for its dividend, you should have an idea of whether Yoong Onn Corporation Berhad's dividend is reliable and sustainable. As a result, readers should always check whether Yoong Onn Corporation Berhad has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Yoong Onn Corporation Berhad

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Yoong Onn Corporation Berhad's payout ratio is modest, at just 41% of profit. A useful secondary check can be to evaluate whether Yoong Onn Corporation Berhad generated enough free cash flow to afford its dividend. Luckily it paid out just 24% of its free cash flow last year.

It's positive to see that Yoong Onn Corporation Berhad's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit Yoong Onn Corporation Berhad paid out over the last 12 months.

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. With that in mind, we're encouraged by the steady growth at Yoong Onn Corporation Berhad, with earnings per share up 6.4% 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. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Yoong Onn Corporation Berhad has delivered 7.2% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

From a dividend perspective, should investors buy or avoid Yoong Onn Corporation Berhad? Earnings per share growth has been growing somewhat, and Yoong Onn Corporation Berhad is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. 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 Yoong Onn Corporation Berhad is halfway there. Overall we think this is an attractive combination and worthy of further research.

So while Yoong Onn Corporation Berhad looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 2 warning signs for Yoong Onn Corporation Berhad you should know about.

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.