Here's What We Like About Samsung SDS' (KRX:018260) Upcoming Dividend
Samsung SDS Co., Ltd. (KRX:018260) stock is about to trade ex-dividend in 4 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible 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. Accordingly, Samsung SDS investors that purchase the stock on or after the 29th of December will not receive the dividend, which will be paid on the 20th of April.
The company's next dividend payment will be ₩2900.00 per share, and in the last 12 months, the company paid a total of ₩2,900 per share. Last year's total dividend payments show that Samsung SDS has a trailing yield of 1.7% on the current share price of ₩169500.00. 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.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Samsung SDS paid out a comfortable 29% of its profit last year. A useful secondary check can be to evaluate whether Samsung SDS generated enough free cash flow to afford its dividend. The good news is it paid out just 20% of its free cash flow in the last year.
It's positive to see that Samsung SDS'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.
See our latest analysis for Samsung SDS
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're not enthused to see that Samsung SDS's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Recent earnings growth has been limited. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past six years, Samsung SDS has increased its dividend at approximately 6.4% a year on average.
The Bottom Line
Is Samsung SDS an attractive dividend stock, or better left on the shelf? Earnings per share have been flat over this time, but we're intrigued to see that Samsung SDS is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. Generally we like to see both low payout ratios and strong earnings per share growth, but Samsung SDS is halfway there. It's a promising combination that should mark this company worthy of closer attention.
Wondering what the future holds for Samsung SDS? See what the 19 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.