Read This Before Considering HDC Hyundai Engineering Plastics Co., Ltd. (KRX:089470) For Its Upcoming ₩120 Dividend

HDC Hyundai Engineering Plastics Co., Ltd. (KRX:089470) stock is about to trade ex-dividend in three days. This means that investors who purchase shares on or after the 29th of December will not receive the dividend, which will be paid on the 23rd of April.

HDC Hyundai Engineering Plastics's next dividend payment will be ₩120 per share, on the back of last year when the company paid a total of ₩120 to shareholders. Based on the last year's worth of payments, HDC Hyundai Engineering Plastics has a trailing yield of 1.9% on the current stock price of ₩6180. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for HDC Hyundai Engineering Plastics

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. HDC Hyundai Engineering Plastics has a low and conservative payout ratio of just 25% of its income after tax. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Luckily it paid out just 6.0% of its free cash flow last year.

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.

Click here to see how much of its profit HDC Hyundai Engineering Plastics paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're discomforted by HDC Hyundai Engineering Plastics's 11% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, HDC Hyundai Engineering Plastics has lifted its dividend by approximately 7.2% a year on average.

The Bottom Line

Is HDC Hyundai Engineering Plastics an attractive dividend stock, or better left on the shelf? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. In summary, it's hard to get excited about HDC Hyundai Engineering Plastics from a dividend perspective.

In light of that, while HDC Hyundai Engineering Plastics has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 1 warning sign for HDC Hyundai Engineering Plastics that you should be aware of before investing in their shares.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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