Is Samjin LND Co., Ltd. (KOSDAQ:054090) A Strong Dividend Stock?

Dividend paying stocks like Samjin LND Co., Ltd. (KOSDAQ:054090) tend to be popular with investors, and for good reason - some research suggests a significant amount of all stock market returns come from reinvested dividends. If you are hoping to live on your dividends, it's important to be more stringent with your investments than the average punter. Regular readers know we like to apply the same approach to each dividend stock, and we hope you'll find our analysis useful.

With only a two-year payment history, and a 2.0% yield, investors probably think Samjin LND is not much of a dividend stock. While it may not look like much, if earnings are growing it could become quite interesting. The company also bought back stock equivalent to around 1.9% of market capitalisation this year. Some simple analysis can reduce the risk of holding Samjin LND for its dividend, and we'll focus on the most important aspects below.

Explore this interactive chart for our latest analysis on Samjin LND!

Payout ratios

Dividends are usually paid out of company earnings. If a company is paying more than it earns, then the dividend might become unsustainable - hardly an ideal situation. As a result, we should always investigate whether a company can afford its dividend, measured as a percentage of a company's net income after tax. Although it reported a loss over the past 12 months, Samjin LND currently pays a dividend. When a company is loss-making, we next need to check to see if its cash flows can support the dividend.

Last year, Samjin LND paid a dividend while reporting negative free cash flow. While there may be an explanation, we think this behaviour is generally not sustainable.

Consider getting our latest analysis on Samjin LND's financial position here.

Dividend Volatility

From the perspective of an income investor who wants to earn dividends for many years, there is not much point buying a stock if its dividend is regularly cut or is not reliable. The dividend has not fluctuated much, but with a relatively short payment history, we can't be sure this is sustainable across a full market cycle. Its most recent annual dividend was ₩75.0 per share, effectively flat on its first payment two years ago.

It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

Dividend Growth Potential

Dividend payments have been consistent over the past few years, but we should always check if earnings per share (EPS) are growing, as this will help maintain the purchasing power of the dividend. Over the past five years, it looks as though Samjin LND's EPS have declined at around 8.9% a year. If earnings continue to decline, the dividend may come under pressure. Every investor should make an assessment of whether the company is taking steps to stabilise the situation.

Conclusion

When we look at a dividend stock, we need to form a judgement on whether the dividend will grow, if the company is able to maintain it in a wide range of economic circumstances, and if the dividend payout is sustainable. It's a concern to see that the company paid a dividend despite reporting a loss, and the dividend was also not well covered by free cash flow. Second, earnings per share have been in decline, and the dividend history is shorter than we'd like. Using these criteria, Samjin LND looks quite suboptimal from a dividend investment perspective.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Samjin LND (1 is a bit concerning!) that you should be aware of before investing.

Looking for more high-yielding dividend ideas? Try our curated list of dividend stocks with a yield above 3%.

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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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