ABOV Semiconductor Co., Ltd. (KOSDAQ:102120) Passed Our Checks, And It's About To Pay A ₩200 Dividend

It looks like ABOV Semiconductor Co., Ltd. (KOSDAQ:102120) is about to go ex-dividend in the next three days. Investors can purchase shares before the 29th of December in order to be eligible for this dividend, which will be paid on the 1st of April.

ABOV Semiconductor's next dividend payment will be ₩200 per share. Last year, in total, the company distributed ₩200 to shareholders. Calculating the last year's worth of payments shows that ABOV Semiconductor has a trailing yield of 1.2% on the current share price of ₩16200. If you buy this business for its dividend, you should have an idea of whether ABOV Semiconductor's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for ABOV Semiconductor

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. ABOV Semiconductor has a low and conservative payout ratio of just 15% of its income after tax. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 19% of its cash flow last year.

It's positive to see that ABOV Semiconductor'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 ABOV Semiconductor paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see ABOV Semiconductor has grown its earnings rapidly, up 27% a year for the past five years. ABOV Semiconductor earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. ABOV Semiconductor has delivered 23% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Should investors buy ABOV Semiconductor for the upcoming dividend? We love that ABOV Semiconductor is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. ABOV Semiconductor looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in ABOV Semiconductor for the dividends alone, you should always be mindful of the risks involved. For example - ABOV Semiconductor has 1 warning sign we think you should be aware of.

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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