Why It Might Not Make Sense To Buy KEPCO Plant Service & Engineering Co.,Ltd. (KRX:051600) For Its Upcoming Dividend
It looks like KEPCO Plant Service & Engineering Co.,Ltd. (KRX:051600) is about to go ex-dividend in the next three days. The ex-dividend date generally occurs two days 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase KEPCO Plant Service & EngineeringLtd's shares on or after the 29th of December will not receive the dividend, which will be paid on the 27th of April.
The company's next dividend payment will be ₩2469.00 per share. Last year, in total, the company distributed ₩2,469 to shareholders. Looking at the last 12 months of distributions, KEPCO Plant Service & EngineeringLtd has a trailing yield of approximately 4.7% on its current stock price of ₩52600.00. 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! As a result, readers should always check whether KEPCO Plant Service & EngineeringLtd has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. It paid out 79% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be worried about the risk of a drop in earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 84% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.
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.
See our latest analysis for KEPCO Plant Service & EngineeringLtd
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that KEPCO Plant Service & EngineeringLtd's earnings are 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.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last six years, KEPCO Plant Service & EngineeringLtd has lifted its dividend by approximately 5.5% a year on average.
The Bottom Line
Has KEPCO Plant Service & EngineeringLtd got what it takes to maintain its dividend payments? KEPCO Plant Service & EngineeringLtd has been unable to generate earnings growth, but at least its dividend looks sustainable, with its profit and cashflow payout ratios within reasonable limits. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.
With that being said, if you're still considering KEPCO Plant Service & EngineeringLtd as an investment, you'll find it beneficial to know what risks this stock is facing. For example, we've found 1 warning sign for KEPCO Plant Service & EngineeringLtd that we recommend you consider before investing in the business.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.