Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that SK Gas Co., Ltd. (KRX:018670) is about to go ex-dividend in just 3 days. 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.
SK Gas's next dividend payment will be ₩2,970 per share, on the back of last year when the company paid a total of ₩3,000 to shareholders. Last year's total dividend payments show that SK Gas has a trailing yield of 2.8% on the current share price of ₩105500. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Check out our latest analysis for SK Gas
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. SK Gas is paying out just 7.9% 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 SK Gas generated enough free cash flow to afford its dividend. Luckily it paid out just 11% of its free cash flow last year.
It's positive to see that SK Gas'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 consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see SK Gas has grown its earnings rapidly, up 28% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, SK Gas looks like a promising growth company.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, SK Gas has increased its dividend at approximately 7.9% a year on average. 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.
To Sum It Up
From a dividend perspective, should investors buy or avoid SK Gas? We love that SK Gas is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. There's a lot to like about SK Gas, and we would prioritise taking a closer look at it.
On that note, you'll want to research what risks SK Gas is facing. Our analysis shows 2 warning signs for SK Gas that we strongly recommend you have a look at before investing in the company.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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:A018670
SK Gas
Supplies and distributes liquefied petroleum gas (LPG) in South Korea and internationally.
Fair value with mediocre balance sheet.
