Should You Buy Samyang Tongsang Co., Ltd (KRX:002170) For Its Upcoming Dividend?

It looks like Samyang Tongsang Co., Ltd (KRX:002170) is about to go ex-dividend in the next four days. If you purchase the stock on or after the 29th of December, you won't be eligible to receive this dividend, when it is paid on the 3rd of April.

Samyang Tongsang's next dividend payment will be ₩1,000 per share, and in the last 12 months, the company paid a total of ₩1,000 per share. Looking at the last 12 months of distributions, Samyang Tongsang has a trailing yield of approximately 1.6% on its current stock price of ₩62700. 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 investigate whether Samyang Tongsang can afford its dividend, and if the dividend could grow.

See our latest analysis for Samyang Tongsang

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Samyang Tongsang paid out just 6.3% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. It paid out 9.5% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Samyang Tongsang'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 Samyang Tongsang 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Samyang Tongsang has grown its earnings rapidly, up 36% a year for the past five years. Samyang Tongsang looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past nine years, Samyang Tongsang has increased its dividend at approximately 3.2% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

The Bottom Line

Is Samyang Tongsang worth buying for its dividend? We love that Samyang Tongsang is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Samyang Tongsang looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks Samyang Tongsang is facing. Every company has risks, and we've spotted 1 warning sign for Samyang Tongsang 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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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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