SEWON Precision Industry (KRX:021820) Will Pay A Dividend Of ₩150.00

The board of SEWON Precision Industry Co., Ltd. (KRX:021820) has announced that it will pay a dividend on the 24th of October, with investors receiving ₩150.00 per share. Based on this payment, the dividend yield will be 1.6%, which is fairly typical for the industry.

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SEWON Precision Industry's Projected Earnings Seem Likely To Cover Future Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, SEWON Precision Industry's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share could rise by 68.9% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 2.9% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for SEWON Precision Industry

SEWON Precision Industry Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2022, the annual payment back then was ₩25.00, compared to the most recent full-year payment of ₩150.00. This implies that the company grew its distributions at a yearly rate of about 82% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. SEWON Precision Industry has impressed us by growing EPS at 69% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While SEWON Precision Industry is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 3 warning signs for SEWON Precision Industry that you should be aware of before investing. Is SEWON Precision Industry not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.