Protec Co., Ltd. (KOSDAQ:053610) Is About To Go Ex-Dividend, And It Pays A 1.6% Yield

Protec Co., Ltd. (KOSDAQ:053610) stock is about to trade ex-dividend in three days. If you purchase the stock on or after the 29th of December, you won't be eligible to receive this dividend, when it is paid on the 31st of March.

Protec's next dividend payment will be ₩400 per share, and in the last 12 months, the company paid a total of ₩400 per share. Based on the last year's worth of payments, Protec has a trailing yield of 1.6% on the current stock price of ₩25250. If you buy this business for its dividend, you should have an idea of whether Protec's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Protec

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. That's why it's good to see Protec paying out a modest 46% of its earnings. A useful secondary check can be to evaluate whether Protec generated enough free cash flow to afford its dividend. It distributed 30% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Protec'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 Protec 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 earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see Protec's earnings per share have dropped 11% 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. Protec has delivered 15% dividend growth per year on average over the past 10 years.

The Bottom Line

Has Protec got what it takes to maintain its dividend payments? Protec 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. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

So while Protec looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 1 warning sign for Protec 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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