Hanil Networks (KOSDAQ:046110) Could Be A Buy For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Hanil Networks Co., Ltd. (KOSDAQ:046110) is about to trade ex-dividend in the next 3 days. You can purchase shares before the 29th of December in order to receive the dividend, which the company will pay on the 3rd of April.

Hanil Networks's upcoming dividend is ₩230 a share, following on from the last 12 months, when the company distributed a total of ₩230 per share to shareholders. Based on the last year's worth of payments, Hanil Networks stock has a trailing yield of around 4.5% on the current share price of ₩5060. If you buy this business for its dividend, you should have an idea of whether Hanil Networks's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Hanil Networks

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 Hanil Networks paying out a modest 36% of its earnings. A useful secondary check can be to evaluate whether Hanil Networks generated enough free cash flow to afford its dividend. It paid out 8.2% of its free cash flow as dividends last year, which is conservatively low.

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 Hanil Networks 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Hanil Networks's earnings per share have risen 14% per annum over the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Hanil Networks has delivered an average of 25% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Is Hanil Networks an attractive dividend stock, or better left on the shelf? We love that Hanil Networks 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. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Hanil Networks for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 1 warning sign with Hanil Networks and understanding them should be part of your investment process.

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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