Is It Worth Considering Hyundai Mipo Dockyard Co., Ltd. (KRX:010620) For Its Upcoming Dividend?

It looks like Hyundai Mipo Dockyard Co., Ltd. (KRX:010620) is about to go ex-dividend in the next four 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 16th of April.

Hyundai Mipo Dockyard's next dividend payment will be ₩350 per share. Last year, in total, the company distributed ₩350 to shareholders. Based on the last year's worth of payments, Hyundai Mipo Dockyard has a trailing yield of 0.7% on the current stock price of ₩48350. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Hyundai Mipo Dockyard

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Hyundai Mipo Dockyard paid out a comfortable 30% of its profit last year. A useful secondary check can be to evaluate whether Hyundai Mipo Dockyard generated enough free cash flow to afford its dividend. Luckily it paid out just 13% of its free cash flow last year.

It's positive to see that Hyundai Mipo Dockyard'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?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're discomforted by Hyundai Mipo Dockyard's 12% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Hyundai Mipo Dockyard's dividend payments per share have declined at 14% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

To Sum It Up

Should investors buy Hyundai Mipo Dockyard for the upcoming dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. To summarise, Hyundai Mipo Dockyard looks okay on this analysis, although it doesn't appear a stand-out opportunity.

So while Hyundai Mipo Dockyard looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 1 warning sign with Hyundai Mipo Dockyard and understanding them should be part of your investment process.

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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