The board of Yoong Onn Corporation Berhad (KLSE:YOCB) has announced that it will be paying its dividend of MYR0.035 on the 25th of July, an increased payment from last year's comparable dividend. Despite this raise, the dividend yield of 4.9% is only a modest boost to shareholder returns.
View our latest analysis for Yoong Onn Corporation Berhad
Yoong Onn Corporation Berhad's Earnings Easily Cover The Distributions
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Yoong Onn Corporation Berhad was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share could rise by 11.8% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 23% by next year, which is in a pretty sustainable range.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the annual payment back then was MYR0.03, 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 8.8% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.
The Dividend Looks Likely To Grow
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Yoong Onn Corporation Berhad has seen EPS rising for the last five years, at 12% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Yoong Onn Corporation Berhad's prospects of growing its dividend payments in the future.
We Really Like Yoong Onn Corporation Berhad's Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Yoong Onn Corporation Berhad that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.