Hojeon Limited (KRX:111110) Looks Interesting, And It's About To Pay A Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Hojeon Limited (KRX:111110) is about to trade ex-dividend in the next three days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible 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 Hojeon's shares before the 29th of December in order to receive the dividend, which the company will pay on the 27th of April.

The company's upcoming dividend is ₩400.00 a share, following on from the last 12 months, when the company distributed a total of ₩400 per share to shareholders. Last year's total dividend payments show that Hojeon has a trailing yield of 4.8% on the current share price of ₩8340.00. If you buy this business for its dividend, you should have an idea of whether Hojeon's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Hojeon is paying out just 20% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. Over the last year, it paid out more than three-quarters (77%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's positive to see that Hojeon'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.

See our latest analysis for Hojeon

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. That's why it's comforting to see Hojeon's earnings have been skyrocketing, up 42% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, six years ago, Hojeon has lifted its dividend by approximately 8.1% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Should investors buy Hojeon for the upcoming dividend? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. It's a promising combination that should mark this company worthy of closer attention.

On that note, you'll want to research what risks Hojeon is facing. For example, Hojeon has 3 warning signs (and 1 which is potentially serious) we think you should know about.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.