Here's What We Like About Pungguk Ethanol Industrial's (KOSDAQ:023900) Upcoming Dividend

Pungguk Ethanol Industrial Co., Ltd (KOSDAQ:023900) is about to trade ex-dividend in the next three 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 26th of March.

Pungguk Ethanol Industrial's next dividend payment will be ₩160 per share, on the back of last year when the company paid a total of ₩160 to shareholders. Last year's total dividend payments show that Pungguk Ethanol Industrial has a trailing yield of 0.8% on the current share price of ₩20800. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Pungguk Ethanol Industrial

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. Pungguk Ethanol Industrial paid out a comfortable 26% of its profit last year. 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 21% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Pungguk Ethanol Industrial'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 Pungguk Ethanol Industrial paid out over the last 12 months.

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 Pungguk Ethanol Industrial earnings per share are up 4.6% per annum over the last five years. Recent growth has not been impressive. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Pungguk Ethanol Industrial has lifted its dividend by approximately 1.8% a year on average.

The Bottom Line

Should investors buy Pungguk Ethanol Industrial for the upcoming dividend? Earnings per share growth has been growing somewhat, and Pungguk Ethanol Industrial 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 Pungguk Ethanol Industrial is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Pungguk Ethanol Industrial, and we would prioritise taking a closer look at it.

In light of that, while Pungguk Ethanol Industrial has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 1 warning sign for Pungguk Ethanol Industrial 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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