Cuckoo Holdings Co., Ltd. (KRX:192400) is about to trade ex-dividend in the next 3 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 24th of April.
Cuckoo Holdings's next dividend payment will be ₩3,000 per share, and in the last 12 months, the company paid a total of ₩3,000 per share. Looking at the last 12 months of distributions, Cuckoo Holdings has a trailing yield of approximately 3.0% on its current stock price of ₩101000. If you buy this business for its dividend, you should have an idea of whether Cuckoo Holdings's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. Cuckoo Holdings paid out just 18% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 31% of its free cash flow as dividends, a comfortable payout level for most companies.
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.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Cuckoo Holdings earnings per share are up 8.4% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.
Given that Cuckoo Holdings has only been paying a dividend for a year, there's not much of a past history to draw insight from.
The Bottom Line
Has Cuckoo Holdings got what it takes to maintain its dividend payments? Earnings per share growth has been growing somewhat, and Cuckoo Holdings 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 Cuckoo Holdings is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Cuckoo Holdings, and we would prioritise taking a closer look at it.
So while Cuckoo Holdings looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 1 warning sign for Cuckoo Holdings that we recommend you consider before investing in the business.
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.
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