UJU Electronics (KOSDAQ:065680) Could Be A Buy For Its Upcoming Dividend

It looks like UJU Electronics Co. Ltd (KOSDAQ:065680) is about to go ex-dividend in the next three days. You can purchase shares before the 29th of December in order to receive the dividend, which the company will pay on the 20th of April.

UJU Electronics's next dividend payment will be ₩300 per share. Last year, in total, the company distributed ₩300 to shareholders. Last year's total dividend payments show that UJU Electronics has a trailing yield of 0.9% on the current share price of ₩32650. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether UJU Electronics can afford its dividend, and if the dividend could grow.

See our latest analysis for UJU Electronics

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. UJU Electronics has a low and conservative payout ratio of just 19% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Luckily it paid out just 16% of its free cash flow last year.

It's positive to see that UJU Electronics'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 UJU Electronics 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 fall far enough, the company could be forced to cut its dividend. Fortunately for readers, UJU Electronics's earnings per share have been growing at 11% 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. 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. UJU Electronics has delivered 4.1% dividend growth per year on average over the past 10 years. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

The Bottom Line

Is UJU Electronics an attractive dividend stock, or better left on the shelf? UJU Electronics has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. UJU Electronics looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks UJU Electronics is facing. For example, we've found 2 warning signs for UJU Electronics (1 is a bit concerning!) that deserve your attention before investing in the shares.

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.

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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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