How Does SAMWHA CAPACITOR Co.,LTD (KRX:001820) Fare As A Dividend Stock?

Is SAMWHA CAPACITOR Co.,LTD (KRX:001820) a good dividend stock? How can we tell? Dividend paying companies with growing earnings can be highly rewarding in the long term. If you are hoping to live on your dividends, it's important to be more stringent with your investments than the average punter. Regular readers know we like to apply the same approach to each dividend stock, and we hope you'll find our analysis useful.

Some readers mightn't know much about SAMWHA CAPACITORLTD's 0.4% dividend, as it has only been paying distributions for the last two years. A low dividend might not be a bad thing, if the company is reinvesting heavily and growing its sales and profits. Some simple research can reduce the risk of buying SAMWHA CAPACITORLTD for its dividend - read on to learn more.

Click the interactive chart for our full dividend analysis

Payout ratios

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. So we need to form a view on if a company's dividend is sustainable, relative to its net profit after tax. In the last year, SAMWHA CAPACITORLTD paid out 11% of its profit as dividends. With a low payout ratio, it looks like the dividend is comprehensively covered by earnings.

We also measure dividends paid against a company's levered free cash flow, to see if enough cash was generated to cover the dividend. SAMWHA CAPACITORLTD's cash payout ratio last year was 11%, which is quite low and suggests that the dividend was thoroughly covered by cash flow. It's positive to see that SAMWHA CAPACITORLTD'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.

With a strong net cash balance, SAMWHA CAPACITORLTD investors may not have much to worry about in the near term from a dividend perspective.

We update our data on SAMWHA CAPACITORLTD every 24 hours, so you can always get our latest analysis of its financial health, here.

Dividend Volatility

Before buying a stock for its income, we want to see if the dividends have been stable in the past, and if the company has a track record of maintaining its dividend. It has only been paying dividends for a few short years, and the dividend has already been cut at least once. This is one income stream we're not ready to live on. During the past two-year period, the first annual payment was ₩300 in 2019, compared to ₩250 last year. The dividend has shrunk at around 8.7% a year during that period. SAMWHA CAPACITORLTD's dividend hasn't shrunk linearly at 8.7% per annum, but the CAGR is a useful estimate of the historical rate of change.

We struggle to make a case for buying SAMWHA CAPACITORLTD for its dividend, given that payments have shrunk over the past two years.

Dividend Growth Potential

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS are growing. Strong earnings per share (EPS) growth might encourage our interest in the company despite fluctuating dividends, which is why it's great to see SAMWHA CAPACITORLTD has grown its earnings per share at 54% per annum over the past five years. Earnings per share have grown rapidly, and the company is retaining a majority of its earnings. We think this is ideal from an investment perspective, if the company is able to reinvest these earnings effectively.

Conclusion

Dividend investors should always want to know if a) a company's dividends are affordable, b) if there is a track record of consistent payments, and c) if the dividend is capable of growing. It's great to see that SAMWHA CAPACITORLTD is paying out a low percentage of its earnings and cash flow. Next, earnings growth has been good, but unfortunately the dividend has been cut at least once in the past. Overall we think SAMWHA CAPACITORLTD scores well on our analysis. It's not quite perfect, but we'd definitely be keen to take a closer look.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 3 analysts we track are forecasting for SAMWHA CAPACITORLTD for free with public analyst estimates for the company.

If you are a dividend investor, you might also want to look at our curated list of dividend stocks yielding above 3%.

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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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