There's A Lot To Like About Hanwha Systems' (KRX:272210) Upcoming ₩310 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Hanwha Systems Co., Ltd. (KRX:272210) is about to trade ex-dividend in the next three days. You will need to purchase shares before the 29th of December to receive the dividend, which will be paid on the 9th of April.

Hanwha Systems's next dividend payment will be ₩310 per share. Last year, in total, the company distributed ₩310 to shareholders. Last year's total dividend payments show that Hanwha Systems has a trailing yield of 2.0% on the current share price of ₩15400. If you buy this business for its dividend, you should have an idea of whether Hanwha Systems's dividend is reliable and sustainable. As a result, readers should always check whether Hanwha Systems has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Hanwha Systems

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Hanwha Systems's payout ratio is modest, at just 49% of profit. 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. It paid out 14% of its free cash flow as dividends last year, which is conservatively low.

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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. To our modest chagrin, Hanwha Systems earnings per share have been effectively flat over the past year. Growth is a prerequisite for an outstanding dividend company over the long term, but we wouldn't read too much into flat numbers over any one year time frame. Recent earnings growth has been limited. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

One year is a very short time frame in the pantheon of investing, so we wouldn't get too hung up on these numbers.

Hanwha Systems also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

Given that Hanwha Systems has only been paying a dividend for a year, there's not much of a past history to draw insight from.

To Sum It Up

Is Hanwha Systems an attractive dividend stock, or better left on the shelf? Earnings per share have been flat over this time, but we're intrigued to see that Hanwha Systems is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine strong earnings per share growth with a low payout ratio, and Hanwha Systems is halfway there. It's a promising combination that should mark this company worthy of closer attention.

So while Hanwha Systems looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Hanwha Systems has 2 warning signs we think you should be aware of.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

If you decide to trade Hanwha Systems, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.