Why You Might Be Interested In HD Hyundai Co., Ltd. (KRX:267250) For Its Upcoming Dividend
HD Hyundai Co., Ltd. (KRX:267250) stock is about to trade ex-dividend in four 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 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. This means that investors who purchase HD Hyundai's shares on or after the 10th of November will not receive the dividend, which will be paid on the 3rd of December.
The company's upcoming dividend is ₩1300.00 a share, following on from the last 12 months, when the company distributed a total of ₩5,200 per share to shareholders. Based on the last year's worth of payments, HD Hyundai has a trailing yield of 4.0% on the current stock price of ₩129900.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
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. HD Hyundai is paying out just 12% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. It paid out 4.8% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that HD Hyundai'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 HD Hyundai
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. It's encouraging to see HD Hyundai has grown its earnings rapidly, up 36% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, HD Hyundai looks like a promising growth company.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last seven years, HD Hyundai has lifted its dividend by approximately 5.0% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
The Bottom Line
Should investors buy HD Hyundai for the upcoming dividend? It's great that HD Hyundai is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. It's a promising combination that should mark this company worthy of closer attention.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example - HD Hyundai has 1 warning sign we think you should be aware of.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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