The board of YTL Power International Berhad (KLSE:YTLPOWR) has announced that it will be paying its dividend of MYR0.035 on the 29th of November, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 3.3%.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that YTL Power International Berhad's stock price has increased by 69% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
YTL Power International Berhad's Payment Has Solid Earnings Coverage
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, YTL Power International Berhad's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 0.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 23%, which is in the range that makes us comfortable with the sustainability of the dividend.
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was MYR0.0375, compared to the most recent full-year payment of MYR0.07. This implies that the company grew its distributions at a yearly rate of about 6.4% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that YTL Power International Berhad has been growing its earnings per share at 26% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
We Really Like YTL Power International Berhad's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for YTL Power International Berhad (of which 1 is potentially serious!) 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.
YTL Power International Berhad
YTL Power International Berhad, an investment holding company, provides electricity, clean water, sewerage system, and communication services in Malaysia, Singapore, the United Kingdom, and internationally.
Undervalued with solid track record.