Be Sure To Check Out SK Networks Company Limited (KRX:001740) Before It Goes Ex-Dividend

SK Networks Company Limited (KRX:001740) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, SK Networks investors that purchase the stock on or after the 27th of September will not receive the dividend, which will be paid on the 25th of October.

The company's next dividend payment will be ₩100.00 per share. Last year, in total, the company distributed ₩200 to shareholders. Based on the last year's worth of payments, SK Networks has a trailing yield of 4.1% on the current stock price of ₩4875.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether SK Networks has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for SK Networks

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Its dividend payout ratio is 78% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. It could become a concern if earnings started to decline. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 9.3% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that SK Networks'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?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, SK Networks's earnings per share have been growing at 14% a year for the past five years. The company paid out most of its earnings as dividends over the last year, even though business is booming and earnings per share are growing rapidly. We're surprised that management has not elected to reinvest more in the business to accelerate growth further.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past nine years, SK Networks has increased its dividend at approximately 8.0% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Is SK Networks worth buying for its dividend? SK Networks's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. SK Networks looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in SK Networks for the dividends alone, you should always be mindful of the risks involved. For instance, we've identified 3 warning signs for SK Networks (1 is a bit unpleasant) you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.