Sebo Manufacturing Engineering & Construction (KOSDAQ:011560) Has Affirmed Its Dividend Of ₩550.00

Sebo Manufacturing, Engineering & Construction Corp.'s (KOSDAQ:011560) investors are due to receive a payment of ₩550.00 per share on 3rd of April. Based on this payment, the dividend yield on the company's stock will be 4.3%, which is an attractive boost to shareholder returns.

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Sebo Manufacturing Engineering & Construction's Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Sebo Manufacturing Engineering & Construction was paying only paying out a fraction of earnings, but the payment was a massive 743% of cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Looking forward, earnings per share could rise by 39.3% 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 18% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Sebo Manufacturing Engineering & Construction

Sebo Manufacturing Engineering & Construction's Dividend Has Lacked Consistency

It's comforting to see that Sebo Manufacturing Engineering & Construction has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of ₩300.00 in 2019 to the most recent total annual payment of ₩550.00. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Sebo Manufacturing Engineering & Construction has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Sebo Manufacturing Engineering & Construction has seen EPS rising for the last five years, at 39% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Sebo Manufacturing Engineering & Construction is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Sebo Manufacturing Engineering & Construction that investors should know about before committing capital to this stock. Is Sebo Manufacturing Engineering & Construction 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.