Miwon Specialty Chemical (KRX:268280) Could Be A Buy For Its Upcoming Dividend

It looks like Miwon Specialty Chemical Co., Ltd. (KRX:268280) is about to go ex-dividend in the next three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Miwon Specialty Chemical's shares before the 27th of December in order to receive the dividend, which the company will pay on the 4th of April.

The company's next dividend payment will be ₩1400.00 per share, on the back of last year when the company paid a total of ₩2,800 to shareholders. Looking at the last 12 months of distributions, Miwon Specialty Chemical has a trailing yield of approximately 1.9% on its current stock price of ₩146500.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Miwon Specialty Chemical has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Miwon Specialty Chemical

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. Miwon Specialty Chemical paid out just 23% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. Luckily it paid out just 18% of its free cash flow last year.

It's positive to see that Miwon Specialty Chemical'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 Miwon Specialty 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Miwon Specialty Chemical, with earnings per share up 5.7% on average 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. In the last five years, Miwon Specialty Chemical has lifted its dividend by approximately 23% 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.

The Bottom Line

Should investors buy Miwon Specialty Chemical for the upcoming dividend? Earnings per share growth has been growing somewhat, and Miwon Specialty Chemical is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Miwon Specialty Chemical is halfway there. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in Miwon Specialty Chemical for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 2 warning signs for Miwon Specialty Chemical (of which 1 shouldn't be ignored!) you should know about.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.