Interested In Hanshin Machinery's (KRX:011700) Upcoming ₩15.00 Dividend? You Have Four Days Left

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Hanshin Machinery Co., Ltd. (KRX:011700) is about to go ex-dividend in just 4 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 8th of April.

Hanshin Machinery's next dividend payment will be ₩15.00 per share, and in the last 12 months, the company paid a total of ₩15.00 per share. Based on the last year's worth of payments, Hanshin Machinery has a trailing yield of 0.9% on the current stock price of ₩1600. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Hanshin Machinery can afford its dividend, and if the dividend could grow.

See our latest analysis for Hanshin Machinery

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Hanshin Machinery is paying out just 16% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Hanshin Machinery generated enough free cash flow to afford its dividend. It distributed 25% of its free cash flow as dividends, a comfortable payout level for most companies.

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 Machinery paid out over the last 12 months.

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. Hanshin Machinery's earnings per share have fallen at approximately 16% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Hanshin Machinery's dividend payments per share have declined at 9.3% per year on average over the past 10 years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

The Bottom Line

Has Hanshin Machinery got what it takes to maintain its dividend payments? 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. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

In light of that, while Hanshin Machinery has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 3 warning signs for Hanshin Machinery that we strongly recommend you have a look at before investing in the company.

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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