Be Sure To Check Out Lotte Confectionery Co., Ltd. (KRX:280360) Before It Goes Ex-Dividend

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 Lotte Confectionery Co., Ltd. (KRX:280360) is about to go ex-dividend in just three days. You will need to purchase shares before the 29th of December to receive the dividend, which will be paid on the 24th of April.

Lotte Confectionery's next dividend payment will be ₩1,300 per share. Last year, in total, the company distributed ₩1,300 to shareholders. Looking at the last 12 months of distributions, Lotte Confectionery has a trailing yield of approximately 1.3% on its current stock price of ₩102500. 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 Lotte Confectionery

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. Lotte Confectionery paid out just 25% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Luckily it paid out just 7.8% of its free cash flow last year.

It's positive to see that Lotte Confectionery'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 how much of its profit Lotte Confectionery paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Lotte Confectionery has grown its earnings rapidly, up 22% a year for the past three years. Lotte Confectionery earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

Unfortunately Lotte Confectionery has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

To Sum It Up

Is Lotte Confectionery an attractive dividend stock, or better left on the shelf? We love that Lotte Confectionery 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. It's a promising combination that should mark this company worthy of closer attention.

In light of that, while Lotte Confectionery has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 3 warning signs with Lotte Confectionery and understanding them should be part of your investment process.

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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