Stock Analysis

GS Engineering & Construction Corporation (KRX:006360) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

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GS Engineering & Construction Corporation (KRX:006360) stock is about to trade ex-dividend in four days. Investors can purchase shares before the 29th of December in order to be eligible for this dividend, which will be paid on the 9th of April.

GS Engineering & Construction's next dividend payment will be ₩1,000 per share, on the back of last year when the company paid a total of ₩1,000 to shareholders. Last year's total dividend payments show that GS Engineering & Construction has a trailing yield of 2.8% on the current share price of ₩35850. If you buy this business for its dividend, you should have an idea of whether GS Engineering & Construction's dividend is reliable and sustainable. As a result, readers should always check whether GS Engineering & Construction has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for GS 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. That's why it's good to see GS Engineering & Construction paying out a modest 26% 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. The good news is it paid out just 10% of its free cash flow in the last year.

It's positive to see that GS 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.

KOSE:A006360 Historic Dividend December 24th 2020

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see GS Engineering & Construction has grown its earnings rapidly, up 50% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. GS Engineering & Construction's dividend payments are broadly unchanged compared to where they were 10 years ago.

The Bottom Line

Should investors buy GS Engineering & Construction for the upcoming dividend? GS Engineering & Construction has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in GS Engineering & Construction for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 4 warning signs for GS Engineering & Construction and you should be aware of these before buying any shares.

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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