Just Three Days Till Lotte Chilsung Beverage Co., Ltd. (KRX:005300) Will Be Trading Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Lotte Chilsung Beverage Co., Ltd. (KRX:005300) is about to trade ex-dividend in the next three days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase Lotte Chilsung Beverage's shares before the 28th of March to receive the dividend, which will be paid on the 1st of January.

The company's next dividend payment will be ₩3400.00 per share, on the back of last year when the company paid a total of ₩3,400 to shareholders. Calculating the last year's worth of payments shows that Lotte Chilsung Beverage has a trailing yield of 3.0% on the current share price of ₩111900.00. If you buy this business for its dividend, you should have an idea of whether Lotte Chilsung Beverage's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see Lotte Chilsung Beverage paying out a modest 35% of its earnings. A useful secondary check can be to evaluate whether Lotte Chilsung Beverage generated enough free cash flow to afford its dividend. Lotte Chilsung Beverage paid out more free cash flow than it generated - 177%, to be precise - last year, which we think is concerningly high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

While Lotte Chilsung Beverage's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Lotte Chilsung Beverage's ability to maintain its dividend.

See our latest analysis for Lotte Chilsung Beverage

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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Lotte Chilsung Beverage has grown its earnings rapidly, up 50% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Lotte Chilsung Beverage has delivered an average of 16% per year annual increase in its dividend, based on the past nine years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Is Lotte Chilsung Beverage worth buying for its dividend? We're glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it's not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. Overall, it's hard to get excited about Lotte Chilsung Beverage from a dividend perspective.

In light of that, while Lotte Chilsung Beverage has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 3 warning signs for Lotte Chilsung Beverage (of which 1 is concerning!) you should know about.

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.