There's A Lot To Like About Hyundai Green Food's (KRX:453340) Upcoming ₩314.00 Dividend

Hyundai Green Food Co., Ltd (KRX:453340) stock is about to trade ex-dividend in 4 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled 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. Accordingly, Hyundai Green Food investors that purchase the stock on or after the 29th of September will not receive the dividend, which will be paid on the 30th of October.

The company's next dividend payment will be ₩314.00 per share, on the back of last year when the company paid a total of ₩740 to shareholders. Based on the last year's worth of payments, Hyundai Green Food has a trailing yield of 3.8% on the current stock price of ₩19340.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

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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. Hyundai Green Food paid out just 23% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. Fortunately, it paid out only 39% of its free cash flow in the past year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

See our latest analysis for Hyundai Green Food

Click here to see how much of its profit Hyundai Green Food paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why we're glad to see earnings per share up 17% over the past 12 months. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

One year is a very short time frame in the pantheon of investing, so we wouldn't get too hung up on these numbers.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Hyundai Green Food has delivered an average of 32% per year annual increase in its dividend, based on the past three years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Is Hyundai Green Food worth buying for its dividend? It's great that Hyundai Green Food 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. Hyundai Green Food looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Hyundai Green Food has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Hyundai Green Food has 1 warning sign we think you should be aware of.

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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.