Read This Before Considering SeAH Steel Holdings Corporation (KRX:003030) For Its Upcoming ₩1,500 Dividend

SeAH Steel Holdings Corporation (KRX:003030) is about to trade ex-dividend in the next four days. Investors can purchase shares before the 29th of December in order to be eligible for this dividend, which will be paid on the 20th of April.

SeAH Steel Holdings's next dividend payment will be ₩1,500 per share, on the back of last year when the company paid a total of ₩1,500 to shareholders. Calculating the last year's worth of payments shows that SeAH Steel Holdings has a trailing yield of 3.3% on the current share price of ₩45200. 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 check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for SeAH Steel Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. SeAH Steel Holdings paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If SeAH Steel Holdings didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It paid out 3.9% of its free cash flow as dividends last year, which is conservatively low.

Click here to see how much of its profit SeAH Steel Holdings paid out over the last 12 months.

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. SeAH Steel Holdings was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, SeAH Steel Holdings has lifted its dividend by approximately 12% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

We update our analysis on SeAH Steel Holdings every 24 hours, so you can always get the latest insights on its financial health, here.

The Bottom Line

From a dividend perspective, should investors buy or avoid SeAH Steel Holdings? It's hard to get used to SeAH Steel Holdings paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. In summary, while it has some positive characteristics, we're not inclined to race out and buy SeAH Steel Holdings today.

If you want to look further into SeAH Steel Holdings, it's worth knowing the risks this business faces. To that end, you should learn about the 3 warning signs we've spotted with SeAH Steel Holdings (including 2 which are a bit concerning).

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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