Interested In SK-ElectronicsLTD's (TSE:6677) Upcoming JP¥117.00 Dividend? You Have Three Days Left

It looks like SK-Electronics CO.,LTD. (TSE:6677) is about to go ex-dividend in the next 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. This means that investors who purchase SK-ElectronicsLTD's shares on or after the 27th of September will not receive the dividend, which will be paid on the 18th of December.

The company's upcoming dividend is JP¥117.00 a share, following on from the last 12 months, when the company distributed a total of JP¥117 per share to shareholders. Looking at the last 12 months of distributions, SK-ElectronicsLTD has a trailing yield of approximately 4.8% on its current stock price of JP¥2452.00. 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.

Check out our latest analysis for SK-ElectronicsLTD

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. SK-ElectronicsLTD paid out more than half (62%) of its earnings last year, which is a regular payout ratio for 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 35% of its free cash flow in the past year.

It's positive to see that SK-ElectronicsLTD'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.

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. So we're not too excited that SK-ElectronicsLTD's earnings are down 3.3% a year over the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, SK-ElectronicsLTD has lifted its dividend by approximately 28% 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.

Final Takeaway

Should investors buy SK-ElectronicsLTD for the upcoming 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. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

If you want to look further into SK-ElectronicsLTD, it's worth knowing the risks this business faces. In terms of investment risks, we've identified 2 warning signs with SK-ElectronicsLTD and understanding them should be part of your investment process.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.