Why You Might Be Interested In GnCenergy Co., Ltd (KOSDAQ:119850) For Its Upcoming Dividend

GnCenergy Co., Ltd (KOSDAQ:119850) stock is about to trade ex-dividend in 4 days. You will need to purchase shares before the 29th of December to receive the dividend, which will be paid on the 10th of April.

GnCenergy's next dividend payment will be ₩50.00 per share. Last year, in total, the company distributed ₩50.00 to shareholders. Calculating the last year's worth of payments shows that GnCenergy has a trailing yield of 0.8% on the current share price of ₩6000. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether GnCenergy can afford its dividend, and if the dividend could grow.

See our latest analysis for GnCenergy

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. GnCenergy has a low and conservative payout ratio of just 18% of its income after tax. A useful secondary check can be to evaluate whether GnCenergy generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 7.1% of its cash flow last year.

It's positive to see that GnCenergy'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 the company's payout ratio, plus analyst estimates of its future dividends.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see GnCenergy earnings per share are up 4.5% per annum over the last five years. Growth has been anaemic. Yet with more than 75% of its earnings being kept in the business, there is ample room to reinvest in growth or lift the payout ratio - either of which could increase the dividend.

Given that GnCenergy has only been paying a dividend for a year, there's not much of a past history to draw insight from.

To Sum It Up

Should investors buy GnCenergy for the upcoming dividend? Earnings per share have been growing moderately, and GnCenergy is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but GnCenergy is being conservative with its dividend payouts and could still perform reasonably over the long run. Overall we think this is an attractive combination and worthy of further research.

In light of that, while GnCenergy has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 3 warning signs for GnCenergy you should know about.

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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