If one takes a look at the S&P/ASX 200 Index (ASX: XJO) right now, there will be plenty of ASX income shares that have dividend yields in the 2-3% range. There will be a few sporting yields of between 3-4%, and fewer still in the 4-5% or above range. But 10%? Those would be about as rare as hen's teeth. Well, not quite. There's currently one ASX 200 income stock that sports a dividend yield north of 10%.
It is none other than Yancoal Australia Ltd (ASX: YAL).
Yancoal is a relatively new entrant to the ASX 200 Index. It is a coal miner with operations spanning both thermal and metallurgical coal. Yancoal has a series of mines that it either owns or has an interest in. These span across New South Wales, Queensland and Western Australia.
At the time of writing, this ASX income stock is trading at $5.68 a share, down 1.47% for the day thus far. At this share price, Yancoal stock is seemingly trading on a lofty dividend yield of 10.24%. That dividend yield has historically come with full franking credits attached as well. So is this the biggest income opportunity on the ASX right now?
Well, as is usually the case with shares seemingly offering dividend yields this large, it is not as good as it looks.
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Is this 10.24% dividend yield too good to be true?
For one, Yancoal is not a consistent dividend payer. Sometimes, it doles out two dividends per year, as is the norm on the ASX. But some years see this company pay out just one dividend, and others, no dividends at all.
It is true that Yancoal has paid out two dividends over the past 12 months. The first was the 52 cents per share payment investors enjoyed back in April. The second, the 6.2 cents per share payout from September.
Together, that amounts to 58.2 cents per share, which is where that 10.24% yield comes from.
However, that former 52 cents per share payout was an annual one, covering the full 2024 year. Last year indeed only saw one dividend payment, with no interim dividend paid out.
As such, Yancoal's current dividend yield can arguably be thought of as 'backloaded'. No investor should expect that they will get a 10.24% return in the form of dividend cash flow from investing in this ASX 200 income stock today.
Investors should also keep in mind that Yancoal is an ASX energy share, and thus subject to the capricious whims of global commodity prices. When coal prices are high, this company has historically shown an ability to fund massive dividend payouts. However, those payouts can dry up very quickly when prices inevitably go the other way.
