NeoPharm CO., LTD. (KOSDAQ:092730) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Readers hoping to buy NeoPharm CO., LTD. (KOSDAQ:092730) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 10th of April.

NeoPharm's upcoming dividend is ₩750 a share, following on from the last 12 months, when the company distributed a total of ₩750 per share to shareholders. Based on the last year's worth of payments, NeoPharm has a trailing yield of 2.6% on the current stock price of ₩28350. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether NeoPharm has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for NeoPharm

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. NeoPharm paid out a comfortable 31% of its profit last year. A useful secondary check can be to evaluate whether NeoPharm generated enough free cash flow to afford its dividend. Dividends consumed 52% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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 fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see NeoPharm's earnings have been skyrocketing, up 38% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. NeoPharm has delivered an average of 25% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Is NeoPharm worth buying for its dividend? Earnings per share have grown at a nice rate in recent times and over the last year, NeoPharm paid out less than half its earnings and a bit over half its free cash flow. It's a promising combination that should mark this company worthy of closer attention.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we've spotted 1 warning sign for NeoPharm 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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