Only Three Days Left To Cash In On SJM's (KRX:123700) Dividend

SJM Co., Ltd. (KRX:123700) is about to trade ex-dividend in the next three days. Ex-dividend means that investors that purchase the stock on or after the 29th of December will not receive this dividend, which will be paid on the 23rd of April.

SJM's next dividend payment will be ₩125 per share, and in the last 12 months, the company paid a total of ₩125 per share. Last year's total dividend payments show that SJM has a trailing yield of 4.1% on the current share price of ₩3030. 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 investigate whether SJM can afford its dividend, and if the dividend could grow.

Check out our latest analysis for SJM

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. SJM paid out more than half (64%) 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. What's good is that dividends were well covered by free cash flow, with the company paying out 4.5% of its cash flow last 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.

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by SJM's 27% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. SJM's dividend payments per share have declined at 0.6% per year on average over the past 10 years, which is uninspiring.

The Bottom Line

Should investors buy SJM for the upcoming dividend? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. In summary, while it has some positive characteristics, we're not inclined to race out and buy SJM today.

If you're not too concerned about SJM's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example, SJM has 3 warning signs (and 1 which is a bit concerning) we think you should know about.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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