Do These 3 Checks Before Buying Korea Ratings Co., Ltd. (KOSDAQ:034950) For Its Upcoming Dividend

Korea Ratings Co., Ltd. (KOSDAQ:034950) is about to trade ex-dividend in the next three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Korea Ratings' shares on or after the 27th of February will not receive the dividend, which will be paid on the 1st of January.

The company's upcoming dividend is ₩3954.00 a share, following on from the last 12 months, when the company distributed a total of ₩5,131 per share to shareholders. Calculating the last year's worth of payments shows that Korea Ratings has a trailing yield of 5.8% on the current share price of ₩89200.00. If you buy this business for its dividend, you should have an idea of whether Korea Ratings's dividend is reliable and sustainable. So we need to investigate whether Korea Ratings can afford its dividend, and if the dividend could grow.

See our latest analysis for Korea Ratings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Korea Ratings paid out 95% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances.

When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.

Click here to see how much of its profit Korea Ratings 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Korea Ratings, with earnings per share up 3.7% on average over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Korea Ratings has delivered 14% dividend growth per year on average over the past six years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

From a dividend perspective, should investors buy or avoid Korea Ratings? While we like that its earnings are growing somewhat, we're not enamored that it's paying out 95% of last year's earnings. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

With that being said, if you're still considering Korea Ratings as an investment, you'll find it beneficial to know what risks this stock is facing. To help with this, we've discovered 1 warning sign for Korea Ratings 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.