There's A Lot To Like About Value Added Technology's (KOSDAQ:043150) Upcoming ₩100.00 Dividend

Readers hoping to buy Value Added Technology Co., Ltd. (KOSDAQ:043150) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. This means that investors who purchase shares on or after the 29th of December will not receive the dividend, which will be paid on the 10th of April.

Value Added Technology's next dividend payment will be ₩100.00 per share, on the back of last year when the company paid a total of ₩100.00 to shareholders. Last year's total dividend payments show that Value Added Technology has a trailing yield of 0.4% on the current share price of ₩22250. 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! We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Value Added Technology

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. Value Added Technology has a low and conservative payout ratio of just 9.9% of its income after tax. 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 4.3% of its free cash flow as dividends last year, which is conservatively low.

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.

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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Value Added Technology, with earnings per share up 8.9% on average over the last five years. Earnings per share have been growing at a decent rate, and the company is retaining more than three-quarters of its earnings in the business. This is an attractive combination, because when profits are reinvested effectively, growth can compound, with corresponding benefits for earnings and dividends in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Value Added Technology's dividend payments are broadly unchanged compared to where they were 10 years ago.

To Sum It Up

Has Value Added Technology got what it takes to maintain its dividend payments? Earnings per share have been growing moderately, and Value Added Technology is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Value Added Technology is halfway there. There's a lot to like about Value Added Technology, and we would prioritise taking a closer look at it.

So while Value Added Technology looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Value Added Technology 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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