Namhae Chemical Corporation (KRX:025860) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

It looks like Namhae Chemical Corporation (KRX:025860) is about to go ex-dividend in the next three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Namhae Chemical's shares before the 27th of December in order to be eligible for the dividend, which will be paid on the 18th of April.

The company's upcoming dividend is ₩60.00 a share, following on from the last 12 months, when the company distributed a total of ₩60.00 per share to shareholders. Looking at the last 12 months of distributions, Namhae Chemical has a trailing yield of approximately 0.9% on its current stock price of ₩6350.00. If you buy this business for its dividend, you should have an idea of whether Namhae Chemical's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Namhae Chemical

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Namhae Chemical has a low and conservative payout ratio of just 9.9% of its income after tax. A useful secondary check can be to evaluate whether Namhae Chemical generated enough free cash flow to afford its dividend. It paid out 4.3% 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 Namhae Chemical 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Namhae Chemical earnings per share are up 7.2% per annum over the last five years. Earnings per share have been growing at a decent rate, and the company is retaining more than three-quarters of its earnings in the business. This is an attractive combination, because when profits are reinvested effectively, growth can compound, with corresponding benefits for earnings and dividends in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. It looks like the Namhae Chemical dividends are largely the same as they were three years ago.

Final Takeaway

Is Namhae Chemical an attractive dividend stock, or better left on the shelf? Earnings per share have been growing moderately, and Namhae Chemical is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Namhae Chemical is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Namhae Chemical, and we would prioritise taking a closer look at it.

In light of that, while Namhae Chemical has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 1 warning sign for Namhae Chemical and you should be aware of this before buying any shares.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.