Kolon Global Corporation (KRX:003070) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

It looks like Kolon Global Corporation (KRX:003070) is about to go 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 24th of April.

Kolon Global's next dividend payment will be ₩150 per share. Last year, in total, the company distributed ₩350 to shareholders. Based on the last year's worth of payments, Kolon Global has a trailing yield of 1.9% on the current stock price of ₩18900. 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 Kolon Global can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Kolon Global

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Kolon Global has a low and conservative payout ratio of just 10% of its income after tax. 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 3.5% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Kolon Global'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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Kolon Global has grown its earnings rapidly, up 47% a year for the past five years. Kolon Global earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Kolon Global's dividend payments per share have declined at 3.5% per year on average over the past 10 years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

The Bottom Line

Is Kolon Global worth buying for its dividend? It's great that Kolon Global is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about Kolon Global, and we would prioritise taking a closer look at it.

So while Kolon Global looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 2 warning signs for Kolon Global and you should be aware of them before buying any shares.

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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