Should You Buy THN Corporation (KRX:019180) For Its Upcoming Dividend?

It looks like THN Corporation (KRX:019180) is about to go ex-dividend in the next 4 days. 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. Meaning, you will need to purchase THN's shares before the 29th of December to receive the dividend, which will be paid on the 27th of April.

The company's next dividend payment will be ₩60.00 per share, and in the last 12 months, the company paid a total of ₩60.00 per share. Based on the last year's worth of payments, THN stock has a trailing yield of around 0.8% on the current share price of ₩7720.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. THN paid out just 2.1% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether THN generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 2.9% of its cash flow last year.

It's positive to see that THN'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 THN

Click here to see how much of its profit THN 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. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see THN's earnings have been skyrocketing, up 24% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, THN looks like a promising growth company.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. THN has delivered 3.1% dividend growth per year on average over the past six years. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

To Sum It Up

Has THN got what it takes to maintain its dividend payments? THN has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past six years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in THN for the dividends alone, you should always be mindful of the risks involved. For example, we've found 2 warning signs for THN that we recommend you consider before investing in the business.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.