Geumhwa Plant Service & Construction Co., Ltd. (KOSDAQ:036190) Looks Interesting, And It's About To Pay A Dividend

Geumhwa Plant Service & Construction Co., Ltd. (KOSDAQ:036190) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. 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. This means that investors who purchase Geumhwa Plant Service & Construction's shares on or after the 27th of December will not receive the dividend, which will be paid on the 14th of April.

The company's upcoming dividend is ₩1300.00 a share, following on from the last 12 months, when the company distributed a total of ₩1,300 per share to shareholders. Based on the last year's worth of payments, Geumhwa Plant Service & Construction stock has a trailing yield of around 5.1% on the current share price of ₩25250.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Geumhwa Plant Service & Construction

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. Geumhwa Plant Service & Construction has a low and conservative payout ratio of just 17% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. What's good is that dividends were well covered by free cash flow, with the company paying out 17% of its 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 Geumhwa Plant Service & Construction paid out over the last 12 months.

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 earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Geumhwa Plant Service & Construction, with earnings per share up 2.4% on average over the last five years. Geumhwa Plant Service & Construction is retaining more than three-quarters of its earnings and has a history of generating some growth in earnings. We think this is a reasonable combination.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. It looks like the Geumhwa Plant Service & Construction dividends are largely the same as they were five years ago.

Final Takeaway

Should investors buy Geumhwa Plant Service & Construction for the upcoming dividend? Earnings per share growth has been growing somewhat, and Geumhwa Plant Service & Construction is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Geumhwa Plant Service & Construction is halfway there. Geumhwa Plant Service & Construction looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Keen to explore more data on Geumhwa Plant Service & Construction's financial performance? Check out our visualisation of its historical revenue and earnings growth.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.