Is It Worth Considering Hanjin Transportation Co., Ltd. (KRX:002320) For Its Upcoming Dividend?

Hanjin Transportation Co., Ltd. (KRX:002320) stock is about to trade ex-dividend in 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Hanjin Transportation's shares on or after the 27th of December will not receive the dividend, which will be paid on the 21st of April.

The company's next dividend payment will be ₩600.00 per share, and in the last 12 months, the company paid a total of ₩600 per share. Calculating the last year's worth of payments shows that Hanjin Transportation has a trailing yield of 3.1% on the current share price of ₩19120.00. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Hanjin Transportation

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Hanjin Transportation paid out a comfortable 36% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. What's good is that dividends were well covered by free cash flow, with the company paying out 6.5% of its cash flow last year.

It's positive to see that Hanjin Transportation'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?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Hanjin Transportation's earnings per share have fallen at approximately 16% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Hanjin Transportation has delivered 3.7% dividend growth per year on average over the past five years.

Final Takeaway

From a dividend perspective, should investors buy or avoid Hanjin Transportation? Hanjin Transportation has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

So while Hanjin Transportation looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For instance, we've identified 2 warning signs for Hanjin Transportation (1 is concerning) you should be aware of.

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.