Four Days Left Until NPC Co., Ltd. (KRX:004250) Trades Ex-Dividend

Readers hoping to buy NPC Co., Ltd. (KRX:004250) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 29th of December in order to be eligible for this dividend, which will be paid on the 6th of April.

NPC's upcoming dividend is ₩100.00 a share, following on from the last 12 months, when the company distributed a total of ₩100.00 per share to shareholders. Calculating the last year's worth of payments shows that NPC has a trailing yield of 3.1% on the current share price of ₩3250. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for NPC

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see NPC paying out a modest 38% of its earnings. A useful secondary check can be to evaluate whether NPC generated enough free cash flow to afford its dividend. It distributed 28% of its free cash flow as dividends, a comfortable payout level for most companies.

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 how much of its profit NPC paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. 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 discomforted by NPC's 17% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, NPC has lifted its dividend by approximately 6.2% a year on average.

Final Takeaway

Has NPC got what it takes to maintain its dividend payments? NPC has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. To summarise, NPC looks okay on this analysis, although it doesn't appear a stand-out opportunity.

In light of that, while NPC has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 2 warning signs for NPC (1 is significant!) that deserve your attention before investing in the shares.

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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