Yahoo Finance Should You Buy IOI Corporation Berhad (KLSE:IOICORP) For Its Upcoming Dividend?
IOI Corporation Berhad (KLSE:IOICORP) stock is about to trade ex-dividend in 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase IOI Corporation Berhad's shares before the 14th of March in order to receive the dividend, which the company will pay on the 24th of March.
The company's next dividend payment will be RM0.06 per share, on the back of last year when the company paid a total of RM0.14 to shareholders. Last year's total dividend payments show that IOI Corporation Berhad has a trailing yield of 3.6% on the current share price of MYR3.89. If you buy this business for its dividend, you should have an idea of whether IOI Corporation Berhad's dividend is reliable and sustainable. As a result, readers should always check whether IOI Corporation Berhad has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for IOI Corporation 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. IOI Corporation Berhad paid out a comfortable 47% 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. It distributed 41% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that IOI 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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. 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 IOI Corporation Berhad's earnings have been skyrocketing, up 23% per annum for the past five years. IOI 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.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. IOI Corporation Berhad's dividend payments per share have declined at 1.0% per year on average over the past 10 years, which is uninspiring.
Final Takeaway
Has IOI Corporation Berhad got what it takes to maintain its dividend payments? IOI Corporation Berhad has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.
So while IOI Corporation 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 2 warning signs for IOI Corporation Berhad (of which 1 is potentially serious!) you should know about.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
