Read This Before Considering iMarketKorea Inc. (KRX:122900) For Its Upcoming ₩150.00 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see iMarketKorea Inc. (KRX:122900) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be one business day 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase iMarketKorea's shares on or after the 27th of September will not receive the dividend, which will be paid on the 25th of November.

The company's next dividend payment will be ₩150.00 per share, and in the last 12 months, the company paid a total of ₩600 per share. Based on the last year's worth of payments, iMarketKorea stock has a trailing yield of around 7.0% on the current share price of ₩8540.00. 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 check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for iMarketKorea

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. iMarketKorea paid out 121% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance. 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. Fortunately, it paid out only 32% of its free cash flow in the past year.

It's good to see that while iMarketKorea's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, iMarketKorea's earnings per share have been growing at 16% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. iMarketKorea has delivered an average of 5.9% per year annual increase in its dividend, based on the past five years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because iMarketKorea is keeping back more of its profits to grow the business.

To Sum It Up

Is iMarketKorea worth buying for its dividend? It's good to see earnings per share growing and low cashflow payout ratio, although we're uncomfortable with iMarketKorea's paying out such a high percentage of its profit. To summarise, iMarketKorea looks okay on this analysis, although it doesn't appear a stand-out opportunity.

So while iMarketKorea looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 1 warning sign with iMarketKorea and understanding them should be part of your investment process.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.