HDC Hyundai Development Company (KRX:294870) Pays A ₩500 Dividend In Just Two Days

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 HDC Hyundai Development Company (KRX:294870) is about to go ex-dividend in just two days. You can purchase shares before the 29th of December in order to receive the dividend, which the company will pay on the 24th of April.

HDC Hyundai Development's upcoming dividend is ₩500 a share, following on from the last 12 months, when the company distributed a total of ₩500 per share to shareholders. Calculating the last year's worth of payments shows that HDC Hyundai Development has a trailing yield of 2.0% on the current share price of ₩25050. 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 check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for HDC Hyundai Development

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. HDC Hyundai Development has a low and conservative payout ratio of just 12% of its income after tax. 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. Luckily it paid out just 12% of its free cash flow last year.

It's positive to see that HDC Hyundai Development'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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. From this viewpoint, it's unfortunate that earnings per share have declined 12% over the last year.

We'd also point out that HDC Hyundai Development issued a meaningful number of new shares in the past year. 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 HDC Hyundai Development has only been paying a dividend for a year, there's not much of a past history to draw insight from.

The Bottom Line

Should investors buy HDC Hyundai Development for the upcoming dividend? HDC Hyundai Development has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall, it's hard to get excited about HDC Hyundai Development from a dividend perspective.

While it's tempting to invest in HDC Hyundai Development for the dividends alone, you should always be mindful of the risks involved. For example, HDC Hyundai Development has 4 warning signs (and 2 which are concerning) we think you should know about.

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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