Sigong Tech (KOSDAQ:020710) Could Be A Buy For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Sigong Tech Co., Ltd. (KOSDAQ:020710) is about to trade ex-dividend in the next 4 days. This means that investors who purchase shares on or after the 29th of December will not receive the dividend, which will be paid on the 17th of April.

Sigong Tech's next dividend payment will be ₩80.00 per share. Last year, in total, the company distributed ₩80.00 to shareholders. Calculating the last year's worth of payments shows that Sigong Tech has a trailing yield of 1.6% on the current share price of ₩4860. If you buy this business for its dividend, you should have an idea of whether Sigong Tech's dividend is reliable and sustainable. As a result, readers should always check whether Sigong Tech has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Sigong Tech

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Sigong Tech is paying out just 10% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Sigong Tech generated enough free cash flow to afford its dividend. The good news is it paid out just 11% of its free cash flow in the last year.

It's positive to see that Sigong Tech'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 how much of its profit Sigong Tech 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. For this reason, we're glad to see Sigong Tech's earnings per share have risen 17% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Sigong Tech has delivered 10% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Should investors buy Sigong Tech for the upcoming dividend? Sigong Tech has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. There's a lot to like about Sigong Tech, and we would prioritise taking a closer look at it.

So while Sigong Tech looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 1 warning sign for Sigong Tech 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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