There's A Lot To Like About HRS' (KOSDAQ:036640) Upcoming ₩200.00 Dividend

HRS Co., Ltd (KOSDAQ:036640) stock is about to trade ex-dividend in three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase HRS' shares before the 27th of December in order to receive the dividend, which the company will pay on the 9th of April.

The company's next dividend payment will be ₩200.00 per share. Last year, in total, the company distributed ₩200 to shareholders. Calculating the last year's worth of payments shows that HRS has a trailing yield of 4.3% on the current share price of ₩4650.00. If you buy this business for its dividend, you should have an idea of whether HRS's dividend is reliable and sustainable. So we need to investigate whether HRS can afford its dividend, and if the dividend could grow.

View our latest analysis for HRS

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. HRS paid out a comfortable 33% of its profit last year. 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. Fortunately, it paid out only 40% of its free cash flow in the past year.

It's positive to see that HRS'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 HRS 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. That's why it's comforting to see HRS's earnings have been skyrocketing, up 22% per annum for the past five years. HRS is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, five years ago, HRS has lifted its dividend by approximately 46% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Is HRS worth buying for its dividend? It's great that HRS is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in HRS for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 2 warning signs with HRS and understanding them should be part of your investment process.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.