Geumhwa Plant Service & Construction (KOSDAQ:036190) Will Pay A Dividend Of ₩1400.00

Geumhwa Plant Service & Construction Co., Ltd. (KOSDAQ:036190) will pay a dividend of ₩1400.00 on the 13th of April. This means the annual payment is 4.5% of the current stock price, which is above the average for the industry.

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Geumhwa Plant Service & Construction's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Geumhwa Plant Service & Construction was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, EPS could fall by 2.8% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 30%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

View our latest analysis for Geumhwa Plant Service & Construction

Geumhwa Plant Service & Construction Doesn't Have A Long Payment History

It is great to see that Geumhwa Plant Service & Construction has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2019, the annual payment back then was ₩1300.00, compared to the most recent full-year payment of ₩1400.00. This implies that the company grew its distributions at a yearly rate of about 1.2% over that duration. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

Geumhwa Plant Service & Construction May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. It's not great to see that Geumhwa Plant Service & Construction's earnings per share has fallen at approximately 2.8% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Our Thoughts On Geumhwa Plant Service & Construction's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Geumhwa Plant Service & Construction is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Geumhwa Plant Service & Construction that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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