Is It Worth Considering Shindaeyang Paper Co., Ltd. (KRX:016590) For Its Upcoming Dividend?

Readers hoping to buy Shindaeyang Paper Co., Ltd. (KRX:016590) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. This means that investors who purchase Shindaeyang Paper's shares on or after the 29th of December will not receive the dividend, which will be paid on the 13th of April.

The company's next dividend payment will be ₩200.00 per share, on the back of last year when the company paid a total of ₩200 to shareholders. Calculating the last year's worth of payments shows that Shindaeyang Paper has a trailing yield of 1.4% on the current share price of ₩14100.00. If you buy this business for its dividend, you should have an idea of whether Shindaeyang Paper's dividend is reliable and sustainable. So we need to investigate whether Shindaeyang Paper can afford its dividend, and if the dividend could grow.

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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. Shindaeyang Paper is paying out just 19% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Shindaeyang Paper generated enough free cash flow to afford its dividend. It paid out 83% 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 positive to see that Shindaeyang Paper'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 Shindaeyang Paper

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's not ideal to see Shindaeyang Paper's earnings per share have been shrinking at 5.0% a year over the previous five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Shindaeyang Paper has delivered 15% dividend growth per year on average over the past seven years.

To Sum It Up

Should investors buy Shindaeyang Paper for the upcoming dividend? Earnings per share have fallen significantly, although at least Shindaeyang Paper paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

If you're not too concerned about Shindaeyang Paper's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example, Shindaeyang Paper has 2 warning signs (and 1 which is potentially serious) we think you should know about.

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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.