NOVATECH (KOSDAQ:285490) Has Affirmed Its Dividend Of ₩1409.00

NOVATECH Co., Ltd.'s (KOSDAQ:285490) investors are due to receive a payment of ₩1409.00 per share on 25th of April. This means the annual payment is 6.7% of the current stock price, which is above the average for the industry.

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NOVATECH's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, NOVATECH was paying out quite a large proportion of both earnings and cash flow, with the dividend being 98% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Looking forward, earnings per share could rise by 5.1% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 70% by next year, which is in a pretty sustainable range.

View our latest analysis for NOVATECH

NOVATECH Is Still Building Its Track Record

NOVATECH's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The annual payment during the last 5 years was ₩115.24 in 2020, and the most recent fiscal year payment was ₩1409.00. This implies that the company grew its distributions at a yearly rate of about 65% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that NOVATECH has grown earnings per share at 5.1% per year over the past five years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about NOVATECH's payments, as there could be some issues with sustaining them into the future. While NOVATECH is earning enough to cover the payments, the cash flows are lacking. We don't think NOVATECH is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for NOVATECH (of which 1 is a bit concerning!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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