Samsung SDS Co.,Ltd. (KRX:018260) Passed Our Checks, And It's About To Pay A ₩2,400 Dividend

It looks like Samsung SDS Co.,Ltd. (KRX:018260) is about to go ex-dividend in the next four days. You can purchase shares before the 29th of December in order to receive the dividend, which the company will pay on the 17th of April.

Samsung SDSLtd's next dividend payment will be ₩2,400 per share, and in the last 12 months, the company paid a total of ₩2,400 per share. Looking at the last 12 months of distributions, Samsung SDSLtd has a trailing yield of approximately 1.3% on its current stock price of ₩179500. 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.

Check out our latest analysis for Samsung SDSLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Samsung SDSLtd paid out a comfortable 35% of its profit last year. 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. Fortunately, it paid out only 30% of its free cash flow in the past 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 the company's payout ratio, plus analyst estimates of its future dividends.

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 earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Samsung SDSLtd, with earnings per share up 4.9% on average over the last five years. Recent growth has not been impressive. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

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

The Bottom Line

Is Samsung SDSLtd an attractive dividend stock, or better left on the shelf? Earnings per share growth has been growing somewhat, and Samsung SDSLtd is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Samsung SDSLtd is halfway there. Overall we think this is an attractive combination and worthy of further research.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we've spotted 1 warning sign for Samsung SDSLtd you should know about.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

When trading Samsung SDSLtd or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.