Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that CUCKOO Homesys Co., Ltd (KRX:284740) is about to go ex-dividend in just two days. You will need to purchase shares before the 29th of December to receive the dividend, which will be paid on the 24th of April.
CUCKOO Homesys's next dividend payment will be ₩560 per share. Last year, in total, the company distributed ₩560 to shareholders. Calculating the last year's worth of payments shows that CUCKOO Homesys has a trailing yield of 1.4% on the current share price of ₩39000. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
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. CUCKOO Homesys is paying out just 16% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 8.1% of its cash flow last year.
It's positive to see that CUCKOO Homesys'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.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see CUCKOO Homesys has grown its earnings rapidly, up 23% a year for the past three years. CUCKOO Homesys looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
Given that CUCKOO Homesys has only been paying a dividend for a year, there's not much of a past history to draw insight from.
To Sum It Up
Is CUCKOO Homesys worth buying for its dividend? CUCKOO Homesys has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. There's a lot to like about CUCKOO Homesys, and we would prioritise taking a closer look at it.
So while CUCKOO Homesys looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 1 warning sign for CUCKOO Homesys and you should be aware of it before buying any 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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