There's A Lot To Like About Geumhwa Plant Service & Construction's (KOSDAQ:036190) Upcoming ₩1,300 Dividend

It looks like Geumhwa Plant Service & Construction Co., Ltd. (KOSDAQ:036190) is about to go ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 29th of December will not receive this dividend, which will be paid on the 16th of April.

Geumhwa Plant Service & Construction's next dividend payment will be ₩1,300 per share. Last year, in total, the company distributed ₩1,300 to shareholders. Calculating the last year's worth of payments shows that Geumhwa Plant Service & Construction has a trailing yield of 4.3% on the current share price of ₩29950. If you buy this business for its dividend, you should have an idea of whether Geumhwa Plant Service & Construction's dividend is reliable and sustainable. So we need to investigate whether Geumhwa Plant Service & Construction can afford its dividend, and if the dividend could grow.

View our latest analysis for Geumhwa Plant Service & Construction

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Geumhwa Plant Service & Construction has a low and conservative payout ratio of just 24% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. What's good is that dividends were well covered by free cash flow, with the company paying out 21% of its cash flow last year.

It's positive to see that Geumhwa Plant Service & Construction's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Geumhwa Plant Service & Construction earnings per share are up 8.3% per annum over the last five years. Earnings per share have been increasing steadily and management is reinvesting almost all of the profits back into the business. This is an attractive combination, because when profits are reinvested effectively, growth can compound, with corresponding benefits for earnings and dividends in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Geumhwa Plant Service & Construction has lifted its dividend by approximately 16% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

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. It might be nice to see earnings growing faster, but Geumhwa Plant Service & Construction is being conservative with its dividend payouts and could still perform reasonably over the long run. Geumhwa Plant Service & Construction looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Want to learn more about Geumhwa Plant Service & Construction's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

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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