Here's What We Like About NongShim HoldingsLtd's (KRX:072710) Upcoming Dividend

Readers hoping to buy NongShim Holdings Co.,Ltd. (KRX:072710) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Ex-dividend means that investors that purchase the stock on or after the 29th of December will not receive this dividend, which will be paid on the 24th of April.

NongShim HoldingsLtd's next dividend payment will be ₩2,000 per share, on the back of last year when the company paid a total of ₩2,000 to shareholders. Calculating the last year's worth of payments shows that NongShim HoldingsLtd has a trailing yield of 2.7% on the current share price of ₩74800. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether NongShim HoldingsLtd can afford its dividend, and if the dividend could grow.

Check out our latest analysis for NongShim HoldingsLtd

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. NongShim HoldingsLtd paid out just 15% 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. Luckily it paid out just 23% of its free cash flow last year.

It's positive to see that NongShim HoldingsLtd'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 NongShim HoldingsLtd 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 earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, NongShim HoldingsLtd's earnings per share have been growing at 19% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. NongShim HoldingsLtd's dividend payments are broadly unchanged compared to where they were 10 years ago.

The Bottom Line

Is NongShim HoldingsLtd an attractive dividend stock, or better left on the shelf? We love that NongShim HoldingsLtd 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. NongShim HoldingsLtd looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in NongShim HoldingsLtd for the dividends alone, you should always be mindful of the risks involved. For example - NongShim HoldingsLtd has 1 warning sign we think you should be aware of.

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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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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