Is It Worth Considering Cayman Golden Century Wheel Group Limited (KOSDAQ:900280) For Its Upcoming Dividend?

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Cayman Golden Century Wheel Group Limited (KOSDAQ:900280) is about to go ex-dividend in just 2 days. You will need to purchase shares before the 29th of December to receive the dividend, which will be paid on the 1st of January.

Cayman Golden Century Wheel Group's next dividend payment will be ₩3.00 per share. Last year, in total, the company distributed ₩3.00 to shareholders. Calculating the last year's worth of payments shows that Cayman Golden Century Wheel Group has a trailing yield of 1.0% on the current share price of ₩288. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Cayman Golden Century Wheel Group

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. Cayman Golden Century Wheel Group has a low and conservative payout ratio of just 2.0% of its income after tax. A useful secondary check can be to evaluate whether Cayman Golden Century Wheel Group generated enough free cash flow to afford its dividend. It paid out 1.5% of its free cash flow as dividends last year, which is conservatively low.

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 Cayman Golden Century Wheel Group paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're discomforted by Cayman Golden Century Wheel Group's 12% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

We'd also point out that Cayman Golden Century Wheel Group issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.

Unfortunately Cayman Golden Century Wheel Group has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

The Bottom Line

From a dividend perspective, should investors buy or avoid Cayman Golden Century Wheel Group? Cayman Golden Century Wheel Group has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. All things considered, we are not particularly enthused about Cayman Golden Century Wheel Group from a dividend perspective.

While it's tempting to invest in Cayman Golden Century Wheel Group for the dividends alone, you should always be mindful of the risks involved. For example - Cayman Golden Century Wheel Group has 2 warning signs we think you should be aware of.

If you're in the market for dividend stocks, we recommend checking our list of top 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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