JLS Co.,Ltd. (KOSDAQ:040420) Will Pay A ₩530.00 Dividend In Three Days

JLS Co.,Ltd. (KOSDAQ:040420) stock is about to trade ex-dividend in 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a 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. Therefore, if you purchase JLSLtd's shares on or after the 27th of December, you won't be eligible to receive the dividend, when it is paid on the 1st of January.

The company's upcoming dividend is ₩530.00 a share, following on from the last 12 months, when the company distributed a total of ₩530 per share to shareholders. Based on the last year's worth of payments, JLSLtd stock has a trailing yield of around 8.1% on the current share price of ₩6550.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether JLSLtd has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for JLSLtd

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. It paid out 87% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be worried about the risk of a drop in earnings. A useful secondary check can be to evaluate whether JLSLtd generated enough free cash flow to afford its dividend. Over the last year it paid out 73% of its free cash flow as dividends, within the usual range for most companies.

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 JLSLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. 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 JLSLtd has grown its earnings rapidly, up 20% a year for the past five years. The company is paying out more than three-quarters of its earnings, but it is also generating strong earnings growth.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. JLSLtd has delivered 4.3% dividend growth per year on average over the past five years. Earnings per share have been growing much quicker than dividends, potentially because JLSLtd is keeping back more of its profits to grow the business.

To Sum It Up

Is JLSLtd an attractive dividend stock, or better left on the shelf? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. However, we'd also note that JLSLtd is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. In summary, while it has some positive characteristics, we're not inclined to race out and buy JLSLtd today.

While it's tempting to invest in JLSLtd for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 2 warning signs for JLSLtd that you should be aware of before investing in their shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.