Should You Buy Simmtech Holdings Co., Ltd. (KOSDAQ:036710) For Its Upcoming Dividend?

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Simmtech Holdings Co., Ltd. (KOSDAQ:036710) is about to go ex-dividend in just 4 days. If you purchase the stock on or after the 29th of December, you won't be eligible to receive this dividend, when it is paid on the 23rd of April.

Simmtech Holdings's next dividend payment will be ₩10.00 per share. Last year, in total, the company distributed ₩10.00 to shareholders. Based on the last year's worth of payments, Simmtech Holdings has a trailing yield of 0.4% on the current stock price of ₩2420. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Simmtech Holdings

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Simmtech Holdings has a low and conservative payout ratio of just 1.6% of its income after tax. 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. The good news is it paid out just 3.7% of its free cash flow in the last year.

It's positive to see that Simmtech Holdings'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 Simmtech Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Simmtech Holdings's earnings have been skyrocketing, up 31% per annum for the past five years. Simmtech Holdings 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.'

Given that Simmtech Holdings has only been paying a dividend for a year, there's not much of a past history to draw insight from.

To Sum It Up

Should investors buy Simmtech Holdings for the upcoming dividend? We love that Simmtech Holdings 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.

On that note, you'll want to research what risks Simmtech Holdings is facing. To help with this, we've discovered 3 warning signs for Simmtech Holdings that you should be aware of before investing in their shares.

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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