Four Days Left Until Songwon Industrial Co., Ltd. (KRX:004430) Trades Ex-Dividend

Songwon Industrial Co., Ltd. (KRX:004430) is about to trade ex-dividend in the next four days. You will need to purchase shares before the 29th of December to receive the dividend, which will be paid on the 7th of April.

Songwon Industrial's next dividend payment will be ₩150 per share. Last year, in total, the company distributed ₩150 to shareholders. Last year's total dividend payments show that Songwon Industrial has a trailing yield of 1.0% on the current share price of ₩15750. If you buy this business for its dividend, you should have an idea of whether Songwon Industrial's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Songwon Industrial

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. Songwon Industrial has a low and conservative payout ratio of just 12% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 6.3% of its free cash flow as dividends last year, which is conservatively low.

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 Songwon Industrial paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're not enthused to see that Songwon Industrial's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

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, Songwon Industrial has lifted its dividend by approximately 9.6% a year on average.

The Bottom Line

Should investors buy Songwon Industrial for the upcoming dividend? Earnings per share have been flat, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend gets cut. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Songwon Industrial's dividend merits.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example - Songwon Industrial has 2 warning signs we think you should be aware of.

If you're in the market for dividend stocks, we recommend checking our list of top 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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