Interested In Rayence's (KOSDAQ:228850) Upcoming ₩100.00 Dividend? You Have Three Days Left

Rayence Co., Ltd. (KOSDAQ:228850) stock is about to trade ex-dividend in 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Rayence's shares on or after the 27th of December will not receive the dividend, which will be paid on the 18th of April.

The company's next dividend payment will be ₩100.00 per share, and in the last 12 months, the company paid a total of ₩100.00 per share. Based on the last year's worth of payments, Rayence has a trailing yield of 1.6% on the current stock price of ₩6150.00. If you buy this business for its dividend, you should have an idea of whether Rayence's dividend is reliable and sustainable. So we need to investigate whether Rayence can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Rayence

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Rayence has a low and conservative payout ratio of just 14% of its income after tax. A useful secondary check can be to evaluate whether Rayence generated enough free cash flow to afford its dividend. It paid out 7.3% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Rayence'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?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Readers will understand then, why we're concerned to see Rayence's earnings per share have dropped 6.2% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Rayence's dividend payments are effectively flat on where they were five years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.

To Sum It Up

Has Rayence got what it takes to maintain its dividend payments? Rayence has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

While it's tempting to invest in Rayence for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 3 warning signs with Rayence and understanding them should be part of your investment process.

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.