Hyundai Engineering & Construction Co., Ltd. (KRX:000720) Stock Goes Ex-Dividend In Just Four Days

Hyundai Engineering & Construction Co., Ltd. (KRX:000720) stock is about to trade ex-dividend in four days. If you purchase the stock on or after the 29th of December, you won't be eligible to receive this dividend, when it is paid on the 17th of April.

Hyundai Engineering & Construction's upcoming dividend is ₩600 a share, following on from the last 12 months, when the company distributed a total of ₩600 per share to shareholders. Based on the last year's worth of payments, Hyundai Engineering & Construction has a trailing yield of 1.6% on the current stock price of ₩36650. If you buy this business for its dividend, you should have an idea of whether Hyundai Engineering & Construction's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Hyundai Engineering & Construction

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. Hyundai Engineering & Construction paid out a comfortable 29% of its profit last year. 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. The good news is it paid out just 13% of its free cash flow in the last year.

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Readers will understand then, why we're concerned to see Hyundai Engineering & Construction's earnings per share have dropped 7.2% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Hyundai Engineering & Construction's dividend payments are effectively flat on where they were 10 years ago. When earnings are declining yet the dividends are flat, typically the company is either paying out a higher portion of its earnings, or paying out of cash or debt on the balance sheet, neither of which is ideal.

The Bottom Line

Is Hyundai Engineering & Construction an attractive dividend stock, or better left on the shelf? Hyundai Engineering & Construction 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. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Our analysis shows 2 warning signs for Hyundai Engineering & Construction and you should be aware of these before buying any shares.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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