There's A Lot To Like About Hankook Furniture's (KOSDAQ:004590) Upcoming ₩140.00 Dividend

Hankook Furniture Co., Ltd. (KOSDAQ:004590) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves 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 Hankook Furniture's shares on or after the 27th of December will not receive the dividend, which will be paid on the 14th of April.

The company's upcoming dividend is ₩140.00 a share, following on from the last 12 months, when the company distributed a total of ₩175 per share to shareholders. Based on the last year's worth of payments, Hankook Furniture stock has a trailing yield of around 4.3% on the current share price of ₩4070.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Hankook Furniture can afford its dividend, and if the dividend could grow.

See our latest analysis for Hankook Furniture

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. Hankook Furniture has a low and conservative payout ratio of just 22% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Dividends consumed 60% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Hankook Furniture'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 how much of its profit Hankook Furniture paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Hankook Furniture's earnings per share have risen 14% per annum over the last five years. Hankook Furniture has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last six years, Hankook Furniture has lifted its dividend by approximately 7.2% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is Hankook Furniture worth buying for its dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Hankook Furniture paid out less than half its earnings and a bit over half its free cash flow. Hankook Furniture looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while Hankook Furniture looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 1 warning sign for Hankook Furniture and you should be aware of this before buying any shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.