Is It Worth Considering Shin Steel Co.,Ltd. (KOSDAQ:162300) For Its Upcoming Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Shin Steel Co.,Ltd. (KOSDAQ:162300) is about to trade ex-dividend in the next 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Shin SteelLtd's shares on or after the 27th of December, you won't be eligible to receive the dividend, when it is paid on the 25th of April.

The upcoming dividend for Shin SteelLtd will put a total of ₩19.00 per share in shareholders' pockets. If you buy this business for its dividend, you should have an idea of whether Shin SteelLtd's dividend is reliable and sustainable. As a result, readers should always check whether Shin SteelLtd has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Shin SteelLtd

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Shin SteelLtd's payout ratio is modest, at just 33% of profit. 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. Shin SteelLtd paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.

Click here to see how much of its profit Shin SteelLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Shin SteelLtd's earnings per share have plummeted approximately 38% a year over the previous five years.

This is Shin SteelLtd's first year of paying a regular dividend, which is exciting for shareholders - but it does mean there's no dividend history to examine.

To Sum It Up

Is Shin SteelLtd an attractive dividend stock, or better left on the shelf? It's disappointing to see earnings per share declining, and this would ordinarily be enough to discourage us from most dividend stocks, even though Shin SteelLtd is paying out less than half its income as dividends. However, it's also paying out an uncomfortably high percentage of its cash flow, which makes us wonder just how sustainable the dividend really is. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

With that in mind though, if the poor dividend characteristics of Shin SteelLtd don't faze you, it's worth being mindful of the risks involved with this business. For example, Shin SteelLtd has 4 warning signs (and 2 which are potentially serious) we think you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.