Samsung Electro-Mechanics Co., Ltd. (KRX:009150) Goes Ex-Dividend Soon

Samsung Electro-Mechanics Co., Ltd. (KRX:009150) stock is about to trade ex-dividend in 4 days. Ex-dividend means that investors that purchase the stock on or after the 29th of December will not receive this dividend, which will be paid on the 17th of April.

Samsung Electro-Mechanics's upcoming dividend is ₩1,100 a share, following on from the last 12 months, when the company distributed a total of ₩1,100 per share to shareholders. Based on the last year's worth of payments, Samsung Electro-Mechanics stock has a trailing yield of around 0.7% on the current share price of ₩167500. 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 check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Samsung Electro-Mechanics

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. Samsung Electro-Mechanics is paying out just 14% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Samsung Electro-Mechanics generated enough free cash flow to afford its dividend. Luckily it paid out just 15% of its free cash flow last year.

It's positive to see that Samsung Electro-Mechanics'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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's not ideal to see Samsung Electro-Mechanics's earnings per share have been shrinking at 2.6% a year over the previous five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Samsung Electro-Mechanics has lifted its dividend by approximately 3.9% a year on average.

To Sum It Up

Should investors buy Samsung Electro-Mechanics for the upcoming dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

Curious what other investors think of Samsung Electro-Mechanics? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

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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