Should Income Investors Look At Asia Cement Co.,Ltd. (KRX:183190) Before Its Ex-Dividend?

Asia Cement Co.,Ltd. (KRX:183190) is about to trade ex-dividend in the next 3 days. You will need to purchase shares before the 29th of December to receive the dividend, which will be paid on the 2nd of April.

Asia CementLtd's next dividend payment will be ₩1,500 per share, and in the last 12 months, the company paid a total of ₩1,500 per share. Calculating the last year's worth of payments shows that Asia CementLtd has a trailing yield of 2.1% on the current share price of ₩71900. If you buy this business for its dividend, you should have an idea of whether Asia CementLtd's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Asia CementLtd

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 Asia CementLtd paying out a modest 32% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 34% of its free cash flow in the past year.

It's positive to see that Asia CementLtd'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 CementLtd 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see Asia CementLtd's earnings per share have dropped 17% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Asia CementLtd's dividend payments are effectively flat on where they were two years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.

To Sum It Up

Is Asia CementLtd an attractive dividend stock, or better left on the shelf? Asia CementLtd 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. All things considered, we are not particularly enthused about Asia CementLtd from a dividend perspective.

While it's tempting to invest in Asia CementLtd for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 4 warning signs for Asia CementLtd (of which 1 is potentially serious!) you should know about.

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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