Why You Might Be Interested In Hankook Furniture Co., Ltd. (KOSDAQ:004590) For Its Upcoming Dividend

It looks like Hankook Furniture Co., Ltd. (KOSDAQ:004590) is about to go ex-dividend in the next 4 days. Investors can purchase shares before the 29th of December in order to be eligible for this dividend, which will be paid on the 17th of April.

Hankook Furniture's next dividend payment will be ₩95.00 per share. Last year, in total, the company distributed ₩115 to shareholders. Calculating the last year's worth of payments shows that Hankook Furniture has a trailing yield of 2.6% on the current share price of ₩4495. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Hankook Furniture has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Hankook Furniture

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Hankook Furniture is paying out just 21% 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 Hankook Furniture generated enough free cash flow to afford its dividend. It paid out 21% 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 how much of its profit Hankook Furniture paid out over the last 12 months.

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Hankook Furniture earnings per share are up 5.4% per annum over the last five years. Earnings per share have been increasing steadily and management is reinvesting almost all of the profits back into the business. If profits are reinvested effectively, this could be a bullish combination for future earnings and dividends.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Hankook Furniture has delivered 6.7% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

From a dividend perspective, should investors buy or avoid Hankook Furniture? Earnings per share growth has been growing somewhat, and Hankook Furniture 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. It might be nice to see earnings growing faster, but Hankook Furniture is being conservative with its dividend payouts and could still perform reasonably over the long run. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Hankook Furniture is facing. Case in point: We've spotted 2 warning signs for Hankook Furniture you should be aware of.

If you're in the market for dividend stocks, we recommend checking our list of top 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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