Should You Buy Samchully Co.,Ltd (KRX:004690) For Its Upcoming Dividend?

It looks like Samchully Co.,Ltd (KRX:004690) is about to go ex-dividend in the next four days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase SamchullyLtd's shares before the 27th of March in order to be eligible for the dividend, which will be paid on the 1st of January.

The company's upcoming dividend is ₩3000.00 a share, following on from the last 12 months, when the company distributed a total of ₩3,000 per share to shareholders. Based on the last year's worth of payments, SamchullyLtd stock has a trailing yield of around 3.4% on the current share price of ₩89300.00. If you buy this business for its dividend, you should have an idea of whether SamchullyLtd's dividend is reliable and sustainable. As a result, readers should always check whether SamchullyLtd has been able to grow its dividends, or if the dividend might be cut.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. SamchullyLtd paid out just 9.3% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether SamchullyLtd generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 27% of the free cash flow it generated, which is a comfortable payout ratio.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

View our latest analysis for SamchullyLtd

Click here to see how much of its profit SamchullyLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see SamchullyLtd's earnings have been skyrocketing, up 22% per annum for the past five years. SamchullyLtd is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. It looks like the SamchullyLtd dividends are largely the same as they were 10 years ago.

Final Takeaway

Should investors buy SamchullyLtd for the upcoming dividend? We love that SamchullyLtd is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There's a lot to like about SamchullyLtd, and we would prioritise taking a closer look at it.

While it's tempting to invest in SamchullyLtd for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 1 warning sign for SamchullyLtd that you should be aware of before investing in their shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.