United U-LI Corporation Berhad (KLSE:ULICORP) Could Be A Buy For Its Upcoming Dividend
Readers hoping to buy United U-LI Corporation Berhad (KLSE:ULICORP) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be two business days 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. In other words, investors can purchase United U-LI Corporation Berhad's shares before the 24th of August in order to be eligible for the dividend, which will be paid on the 25th of September.
The company's upcoming dividend is RM00.02 a share, following on from the last 12 months, when the company distributed a total of RM0.09 per share to shareholders. Calculating the last year's worth of payments shows that United U-LI Corporation Berhad has a trailing yield of 6.6% on the current share price of RM01.36. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether United U-LI Corporation Berhad has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see United U-LI Corporation Berhad paying out a modest 48% of its earnings. A useful secondary check can be to evaluate whether United U-LI Corporation Berhad generated enough free cash flow to afford its dividend. It distributed 44% 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.
See 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. It's encouraging to see United U-LI Corporation Berhad has grown its earnings rapidly, up 63% a year for the past five years. United U-LI Corporation Berhad is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, United U-LI Corporation Berhad has lifted its dividend by approximately 1.2% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
To Sum It Up
From a dividend perspective, should investors buy or avoid United U-LI Corporation Berhad? It's great that United U-LI Corporation 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.
While it's tempting to invest in United U-LI Corporation Berhad for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 2 warning signs for United U-LI Corporation Berhad 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.