HD Hyundai Electric (KRX:267260) Could Be A Buy For Its Upcoming Dividend

Readers hoping to buy HD Hyundai Electric Co., Ltd. (KRX:267260) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase HD Hyundai Electric's shares on or after the 12th of May will not receive the dividend, which will be paid on the 27th of May.

The company's upcoming dividend is ₩1300.00 a share, following on from the last 12 months, when the company distributed a total of ₩7,100 per share to shareholders. Last year's total dividend payments show that HD Hyundai Electric has a trailing yield of 0.5% on the current share price of ₩1420000.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether HD Hyundai Electric has been able to grow its dividends, or if the dividend might be cut.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see HD Hyundai Electric paying out a modest 35% of its earnings. 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. Fortunately, it paid out only 31% of its free cash flow in the past 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.

See our latest analysis for HD Hyundai Electric

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see HD Hyundai Electric has grown its earnings rapidly, up 61% a year for the past five years. HD Hyundai Electric is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last three years, HD Hyundai Electric has lifted its dividend by approximately 142% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

From a dividend perspective, should investors buy or avoid HD Hyundai Electric? HD Hyundai Electric 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. There's a lot to like about HD Hyundai Electric, and we would prioritise taking a closer look at it.

Ever wonder what the future holds for HD Hyundai Electric? See what the 20 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.