Do These 3 Checks Before Buying Hyosung TNC Corporation (KRX:298020) For Its Upcoming Dividend

Hyosung TNC Corporation (KRX:298020) is about to trade ex-dividend in the next three 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. 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. In other words, investors can purchase Hyosung TNC's shares before the 29th of December in order to be eligible for the dividend, which will be paid on the 2nd of April.

The company's upcoming dividend is ₩10000.00 a share, following on from the last 12 months, when the company distributed a total of ₩10,000 per share to shareholders. Last year's total dividend payments show that Hyosung TNC has a trailing yield of 4.2% on the current share price of ₩237500.00. 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 investigate whether Hyosung TNC can afford its dividend, and if the dividend could grow.

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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. Hyosung TNC is paying out an acceptable 67% of its profit, a common payout level among most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 36% of its free cash flow in the past year.

It's positive to see that Hyosung TNC'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.

Check out our latest analysis for Hyosung TNC

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Hyosung TNC's earnings per share have fallen at approximately 7.0% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last seven years, Hyosung TNC has lifted its dividend by approximately 39% a year on average. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.

The Bottom Line

Is Hyosung TNC worth buying for its dividend? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. In summary, it's hard to get excited about Hyosung TNC from a dividend perspective.

However if you're still interested in Hyosung TNC as a potential investment, you should definitely consider some of the risks involved with Hyosung TNC. In terms of investment risks, we've identified 3 warning signs with Hyosung TNC and understanding them should be part of your investment process.

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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.