It looks like LS ELECTRIC Co., Ltd. (KRX:010120) is about to go ex-dividend in the next 4 days. If you purchase the stock on or after the 29th of December, you won't be eligible to receive this dividend, when it is paid on the 9th of April.
LS ELECTRIC's next dividend payment will be ₩1,200 per share, on the back of last year when the company paid a total of ₩1,200 to shareholders. Calculating the last year's worth of payments shows that LS ELECTRIC has a trailing yield of 1.9% on the current share price of ₩61900. If you buy this business for its dividend, you should have an idea of whether LS ELECTRIC's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for LS ELECTRIC
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. LS ELECTRIC paid out a comfortable 45% of its profit last year. A useful secondary check can be to evaluate whether LS ELECTRIC generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 27% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that LS ELECTRIC'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?
Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Readers will understand then, why we're concerned to see LS ELECTRIC's earnings per share have dropped 7.2% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. LS ELECTRIC's dividend payments are broadly unchanged compared to where they were 10 years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.
The Bottom Line
Has LS ELECTRIC got what it takes to maintain its dividend payments? LS ELECTRIC has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of LS ELECTRIC's dividend merits.
On that note, you'll want to research what risks LS ELECTRIC is facing. To help with this, we've discovered 2 warning signs for LS ELECTRIC that you should be aware of before investing in their shares.
If you're in the market for dividend stocks, we recommend checking our list of top 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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About KOSE:A010120
LS ELECTRIC
Provides smart energy solutions in South Korea and internationally.
Solid track record with excellent balance sheet.
