Should You Buy Sungchang Autotech Co., Ltd. (KOSDAQ:080470) For Its Upcoming Dividend?

Sungchang Autotech Co., Ltd. (KOSDAQ:080470) stock is about to trade ex-dividend in three days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Sungchang Autotech's shares before the 29th of December to receive the dividend, which will be paid on the 20th of April.

The company's upcoming dividend is ₩50.00 a share, following on from the last 12 months, when the company distributed a total of ₩50.00 per share to shareholders. Based on the last year's worth of payments, Sungchang Autotech has a trailing yield of 1.3% on the current stock price of ₩4000.00. If you buy this business for its dividend, you should have an idea of whether Sungchang Autotech's dividend is reliable and sustainable. As a result, readers should always check whether Sungchang Autotech has been able to grow its dividends, or if the dividend might be cut.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Sungchang Autotech has a low and conservative payout ratio of just 4.2% of its income after tax. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 2.8% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Sungchang Autotech'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 Sungchang Autotech

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Sungchang Autotech has grown its earnings rapidly, up 27% a year for the past five years. Sungchang Autotech looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Sungchang Autotech's dividend payments are effectively flat on where they were six years ago.

To Sum It Up

Should investors buy Sungchang Autotech for the upcoming dividend? It's great that Sungchang Autotech 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. There's a lot to like about Sungchang Autotech, and we would prioritise taking a closer look at it.

So while Sungchang Autotech looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 2 warning signs with Sungchang Autotech and understanding them should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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.