Shinsung ST Co., Ltd. (KOSDAQ:416180) Looks Interesting, And It's About To Pay A Dividend

It looks like Shinsung ST Co., Ltd. (KOSDAQ:416180) is about to go ex-dividend in the next three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Shinsung ST's shares on or after the 27th of December will not receive the dividend, which will be paid on the 23rd of April.

The company's upcoming dividend is ₩200.00 a share, following on from the last 12 months, when the company distributed a total of ₩200 per share to shareholders. Calculating the last year's worth of payments shows that Shinsung ST has a trailing yield of 0.7% on the current share price of ₩29750.00. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Shinsung ST

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Shinsung ST paid out just 25% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. Over the last year it paid out 75% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Shinsung ST'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 Shinsung ST 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Shinsung ST has grown its earnings rapidly, up 24% a year for the past five years.

We'd also point out that Shinsung ST issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

Unfortunately Shinsung ST 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

Has Shinsung ST got what it takes to maintain its dividend payments? Earnings per share have grown at a nice rate in recent times and over the last year, Shinsung ST paid out less than half its earnings and a bit over half its free cash flow. It's a promising combination that should mark this company worthy of closer attention.

In light of that, while Shinsung ST has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 1 warning sign for Shinsung ST you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.