The board of Samsung Electronics Co., Ltd. (KRX:005930) has announced that it will pay a dividend of ₩361.00 per share on the 17th of May. This payment means that the dividend yield will be 1.9%, which is around the industry average.
View our latest analysis for Samsung Electronics
Samsung Electronics’ Earnings Easily Cover The Distributions
We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, Samsung Electronics was earning enough to cover the dividend, but it wasn’t generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.
Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend extends its recent trend, estimates say the dividend could reach 25%, which we would be comfortable to see continuing.
Samsung Electronics Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ₩160.00 in 2014, and the most recent fiscal year payment was ₩1444.00. This implies that the company grew its distributions at a yearly rate of about 25% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
The Dividend Has Limited Growth Potential
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let’s not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though Samsung Electronics’ EPS has declined at around 20% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn’t be feeling too comfortable.
Our Thoughts On Samsung Electronics’ Dividend
Overall, it’s nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Samsung Electronics is earning enough to cover the payments, the cash flows are lacking. Overall, we don’t think this company has the makings of a good income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we’ve identified 2 warning signs for Samsung Electronics that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
