Hanatour Service Inc. (KRX:039130) Goes Ex-Dividend Soon

Hanatour Service Inc. (KRX:039130) is about to trade ex-dividend in the next 4 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. Therefore, if you purchase Hanatour Service's shares on or after the 7th of January, you won't be eligible to receive the dividend, when it is paid on the 19th of April.

The company's upcoming dividend is ₩2300.00 a share, following on from the last 12 months, when the company distributed a total of ₩2,300 per share to shareholders. Last year's total dividend payments show that Hanatour Service has a trailing yield of 4.2% on the current share price of ₩54700.00. If you buy this business for its dividend, you should have an idea of whether Hanatour Service's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Hanatour Service

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. Hanatour Service distributed an unsustainably high 148% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. 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. It paid out more than half (59%) of its free cash flow in the past year, which is within an average range for most companies.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Hanatour Service fortunately did generate enough cash to fund its dividend. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Very few companies are able to sustainably pay dividends larger than their reported earnings.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. 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 Hanatour Service has grown its earnings rapidly, up 34% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Hanatour Service has delivered an average of 7.7% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

From a dividend perspective, should investors buy or avoid Hanatour Service? Growing earnings per share and a normal cashflow payout ratio is an ok combination, but we're concerned that the company is paying out such a high percentage of its income as dividends. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

If you want to look further into Hanatour Service, it's worth knowing the risks this business faces. In terms of investment risks, we've identified 2 warning signs with Hanatour Service and understanding them should be part of your investment process.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.