YTL Power International Berhad (KLSE:YTLPOWR) Could Be A Buy For Its Upcoming Dividend

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 YTL Power International Berhad (KLSE:YTLPOWR) is about to go ex-dividend in just 4 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase YTL Power International Berhad's shares before the 12th of November to receive the dividend, which will be paid on the 29th of November.

The company's next dividend payment will be RM00.04 per share, and in the last 12 months, the company paid a total of RM0.065 per share. Based on the last year's worth of payments, YTL Power International Berhad stock has a trailing yield of around 2.1% on the current share price of RM03.34. 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! We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for YTL Power International 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. YTL Power International Berhad has a low and conservative payout ratio of just 17% of its income after tax. A useful secondary check can be to evaluate whether YTL Power International Berhad generated enough free cash flow to afford its dividend. It distributed 47% of its free cash flow as dividends, a comfortable payout level for most companies.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see YTL Power International Berhad's earnings have been skyrocketing, up 46% per annum for the past five years. YTL Power International Berhad is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. YTL Power International Berhad's dividend payments per share have declined at 3.5% per year on average over the past 10 years, which is uninspiring. YTL Power International 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

Has YTL Power International Berhad got what it takes to maintain its dividend payments? It's great that YTL Power International Berhad is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Overall we think this is an attractive combination and worthy of further research.

So while YTL Power International 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 3 warning signs for YTL Power International Berhad (of which 1 is a bit concerning!) you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.