There's A Lot To Like About United U-LI Corporation Berhad's (KLSE:ULICORP) Upcoming RM00.01 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see United U-LI Corporation Berhad (KLSE:ULICORP) is about to trade ex-dividend in the next 4 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a 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. Accordingly, United U-LI Corporation Berhad investors that purchase the stock on or after the 7th of January will not receive the dividend, which will be paid on the 30th of January.

The company's next dividend payment will be RM00.01 per share, and in the last 12 months, the company paid a total of RM0.08 per share. Calculating the last year's worth of payments shows that United U-LI Corporation Berhad has a trailing yield of 2.5% on the current share price of RM01.61. If you buy this business for its dividend, you should have an idea of whether United U-LI Corporation Berhad's dividend is reliable and sustainable. So we need to investigate whether United U-LI Corporation Berhad can afford its dividend, and if the dividend could grow.

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Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. United U-LI Corporation Berhad paid out a comfortable 40% of its profit last year. 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. Over the last year, it paid out more than three-quarters (75%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's positive to see that United U-LI 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.

Check out our latest analysis for United U-LI Corporation Berhad

Click here to see how much of its profit United U-LI 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, United U-LI Corporation Berhad's earnings per share have been growing at 14% a year for the past five years. It paid out more than three-quarters of its earnings in the last year, even though earnings per share are growing rapidly. We're surprised that management has not elected to reinvest more in the business to accelerate growth further.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. United U-LI Corporation Berhad has seen its dividend decline 5.0% per annum on average over the past 10 years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

The Bottom Line

Should investors buy United U-LI Corporation Berhad for the upcoming dividend? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.

In light of that, while United U-LI Corporation Berhad has an appealing dividend, it's worth knowing the risks involved with this stock. For example - United U-LI Corporation Berhad has 2 warning signs we think you should be aware of.

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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.