HS Hwasung Co., Ltd. (KRX:002460) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see HS Hwasung Co., Ltd. (KRX:002460) is about to trade ex-dividend in the next four days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled 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. Thus, you can purchase HS Hwasung's shares before the 29th of December in order to receive the dividend, which the company will pay on the 15th of April.

The company's upcoming dividend is ₩500.00 a share, following on from the last 12 months, when the company distributed a total of ₩500 per share to shareholders. Based on the last year's worth of payments, HS Hwasung has a trailing yield of 3.8% on the current stock price of ₩13180.00. If you buy this business for its dividend, you should have an idea of whether HS Hwasung's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

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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. HS Hwasung has a low and conservative payout ratio of just 14% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 3.7% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that HS Hwasung'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.

View our latest analysis for HS Hwasung

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see HS Hwasung's earnings have been skyrocketing, up 41% per annum for the past five years. HS Hwasung earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. HS Hwasung has seen its dividend decline 7.0% per annum on average over the past eight years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

Final Takeaway

Is HS Hwasung an attractive dividend stock, or better left on the shelf? HS Hwasung has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past eight years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.

In light of that, while HS Hwasung has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 3 warning signs for HS Hwasung that we strongly recommend you have a look at before investing in the company.

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.