Four Days Left Until LG Corp. (KRX:003550) Trades Ex-Dividend

It looks like LG Corp. (KRX:003550) is about to go ex-dividend in the next four days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase LG's shares on or after the 11th of September will not receive the dividend, which will be paid on the 26th of September.

The company's upcoming dividend is ₩1000.00 a share, following on from the last 12 months, when the company distributed a total of ₩3,100 per share to shareholders. Based on the last year's worth of payments, LG stock has a trailing yield of around 4.1% on the current share price of ₩75600.00. 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 LG has been able to grow its dividends, or if the dividend might be cut.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. LG is paying out an acceptable 64% of its profit, a common payout level among 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. It paid out more than half (56%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that LG'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.

See our latest analysis for LG

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

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That explains why we're not overly excited about LG's flat earnings over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

LG also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past six years, LG has increased its dividend at approximately 5.9% a year on average.

The Bottom Line

Has LG got what it takes to maintain its dividend payments? Earnings per share have barely grown, and although LG paid out over half its earnings and free cash flow last year, the payout ratios are within a normal range for most companies. To summarise, LG looks okay on this analysis, although it doesn't appear a stand-out opportunity.

Ever wonder what the future holds for LG? See what the 10 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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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.