Seoul Semiconductor Co., Ltd. (KOSDAQ:046890) Looks Interesting, And It's About To Pay A Dividend

Seoul Semiconductor Co., Ltd. (KOSDAQ:046890) is about to trade ex-dividend in the next three days. You will need to purchase shares before the 29th of December to receive the dividend, which will be paid on the 27th of April.

Seoul Semiconductor's upcoming dividend is ₩156 a share, following on from the last 12 months, when the company distributed a total of ₩156 per share to shareholders. Last year's total dividend payments show that Seoul Semiconductor has a trailing yield of 0.8% on the current share price of ₩19400. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Seoul Semiconductor

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. Fortunately Seoul Semiconductor's payout ratio is modest, at just 39% of profit. 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. Luckily it paid out just 11% of its free cash flow last year.

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 the company's payout ratio, plus analyst estimates of its future dividends.

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. Fortunately for readers, Seoul Semiconductor's earnings per share have been growing at 12% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past eight years, Seoul Semiconductor has increased its dividend at approximately 22% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Is Seoul Semiconductor an attractive dividend stock, or better left on the shelf? Seoul Semiconductor has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past eight years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Seoul Semiconductor is facing. Case in point: We've spotted 2 warning signs for Seoul Semiconductor 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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