Stock Analysis

Should You Buy Asia Paper Manufacturing.Co.,Ltd (KRX:002310) For Its Upcoming Dividend?

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Asia Paper Manufacturing.Co.,Ltd (KRX:002310) stock is about to trade ex-dividend in 4 days. Investors can purchase shares before the 29th of December in order to be eligible for this dividend, which will be paid on the 16th of April.

Asia Paper Manufacturing.Co.Ltd's next dividend payment will be ₩600 per share, and in the last 12 months, the company paid a total of ₩600 per share. Last year's total dividend payments show that Asia Paper Manufacturing.Co.Ltd has a trailing yield of 1.6% on the current share price of ₩37050. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Asia Paper Manufacturing.Co.Ltd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Asia Paper Manufacturing.Co.Ltd is paying out just 12% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 13% of its cash flow last year.

It's positive to see that Asia Paper Manufacturing.Co.Ltd'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 Asia Paper Manufacturing.Co.Ltd paid out over the last 12 months.

KOSE:A002310 Historic Dividend December 24th 2020

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 Asia Paper Manufacturing.Co.Ltd's earnings have been skyrocketing, up 20% per annum for the past five years. Asia Paper Manufacturing.Co.Ltd earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Asia Paper Manufacturing.Co.Ltd has lifted its dividend by approximately 4.1% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Asia Paper Manufacturing.Co.Ltd is keeping back more of its profits to grow the business.

The Bottom Line

From a dividend perspective, should investors buy or avoid Asia Paper Manufacturing.Co.Ltd? Asia Paper Manufacturing.Co.Ltd has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Asia Paper Manufacturing.Co.Ltd, and we would prioritise taking a closer look at it.

So while Asia Paper Manufacturing.Co.Ltd looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 2 warning signs with Asia Paper Manufacturing.Co.Ltd and understanding them should be part of your investment process.

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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