Why You Might Be Interested In HANSHIN Engineering & Construction Co., Ltd. (KRX:004960) For Its Upcoming Dividend

HANSHIN Engineering & Construction Co., Ltd. (KRX:004960) stock is about to trade ex-dividend in 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 23rd of April.

HANSHIN Engineering & Construction's next dividend payment will be ₩350 per share, on the back of last year when the company paid a total of ₩350 to shareholders. Calculating the last year's worth of payments shows that HANSHIN Engineering & Construction has a trailing yield of 2.2% on the current share price of ₩16250. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for HANSHIN 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. HANSHIN Engineering & Construction has a low and conservative payout ratio of just 5.4% of its income after tax. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 1.6% of its cash flow last year.

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 HANSHIN Engineering & Construction paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see HANSHIN Engineering & Construction has grown its earnings rapidly, up 21% a year for the past five years. HANSHIN Engineering & Construction looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. HANSHIN Engineering & Construction's dividend payments per share have declined at 3.5% per year on average over the past 10 years, which is uninspiring. HANSHIN Engineering & Construction is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

Final Takeaway

From a dividend perspective, should investors buy or avoid HANSHIN Engineering & Construction? HANSHIN Engineering & Construction has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. It's a promising combination that should mark this company worthy of closer attention.

So while HANSHIN Engineering & Construction looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 2 warning signs for HANSHIN Engineering & Construction that you should be aware of before investing in their 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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