Is It Smart To Buy CYMECHS Inc. (KOSDAQ:160980) Before It Goes Ex-Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see CYMECHS Inc. (KOSDAQ:160980) 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 10th of April.

CYMECHS's next dividend payment will be ₩250 per share, and in the last 12 months, the company paid a total of ₩250 per share. Calculating the last year's worth of payments shows that CYMECHS has a trailing yield of 1.3% on the current share price of ₩19650. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for CYMECHS

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. CYMECHS is paying out just 12% 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. Luckily it paid out just 18% 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 how much of its profit CYMECHS paid out over the last 12 months.

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, CYMECHS's earnings per share have been growing at 14% 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.

Unfortunately CYMECHS has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

Final Takeaway

Is CYMECHS worth buying for its dividend? We love that CYMECHS 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. CYMECHS looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in CYMECHS for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 3 warning signs for CYMECHS you should know about.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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