Kwang Myung Electric Co.,Ltd (KRX:017040) Pays A ₩15.00 Dividend In Just Four Days

Readers hoping to buy Kwang Myung Electric Co.,Ltd (KRX:017040) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 29th of December in order to be eligible for this dividend, which will be paid on the 24th of April.

Kwang Myung ElectricLtd's next dividend payment will be ₩15.00 per share, on the back of last year when the company paid a total of ₩15.00 to shareholders. Last year's total dividend payments show that Kwang Myung ElectricLtd has a trailing yield of 0.8% on the current share price of ₩1975. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Kwang Myung ElectricLtd

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. Kwang Myung ElectricLtd 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 Kwang Myung ElectricLtd generated enough free cash flow to afford its dividend. Over the last year, it paid out more than three-quarters (77%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Kwang Myung ElectricLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by Kwang Myung ElectricLtd's 5.2% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Unfortunately Kwang Myung ElectricLtd has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

The Bottom Line

Is Kwang Myung ElectricLtd an attractive dividend stock, or better left on the shelf? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

With that being said, if dividends aren't your biggest concern with Kwang Myung ElectricLtd, you should know about the other risks facing this business. In terms of investment risks, we've identified 1 warning sign with Kwang Myung ElectricLtd and understanding them should be part of your investment process.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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