Why You Might Be Interested In Chosun Refractories Co.,Ltd. (KRX:000480) For Its Upcoming Dividend

It looks like Chosun Refractories Co.,Ltd. (KRX:000480) is about to go ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 29th of December will not receive the dividend, which will be paid on the 30th of March.

Chosun RefractoriesLtd's next dividend payment will be ₩4,000 per share, and in the last 12 months, the company paid a total of ₩4,000 per share. Last year's total dividend payments show that Chosun RefractoriesLtd has a trailing yield of 4.6% on the current share price of ₩86800. 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 check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Chosun RefractoriesLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Chosun RefractoriesLtd paying out a modest 31% of its earnings. 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. Thankfully its dividend payments took up just 26% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Chosun RefractoriesLtd'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 Chosun RefractoriesLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's not encouraging to see that Chosun RefractoriesLtd's earnings are effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. Recent growth has not been impressive. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Chosun RefractoriesLtd has lifted its dividend by approximately 7.2% a year on average.

The Bottom Line

Should investors buy Chosun RefractoriesLtd for the upcoming dividend? Earnings per share have been flat over this time, but we're intrigued to see that Chosun RefractoriesLtd 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. Generally we like to see both low payout ratios and strong earnings per share growth, but Chosun RefractoriesLtd is halfway there. There's a lot to like about Chosun RefractoriesLtd, and we would prioritise taking a closer look at it.

While it's tempting to invest in Chosun RefractoriesLtd for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 1 warning sign for Chosun RefractoriesLtd 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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