Here's What We Like About LG Household & Health Care's (KRX:051900) Upcoming Dividend

It looks like LG Household & Health Care Ltd. (KRX:051900) is about to go ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 29th of December will not receive this dividend, which will be paid on the 3rd of April.

LG Household & Health Care's next dividend payment will be ₩11,000 per share, and in the last 12 months, the company paid a total of ₩11,000 per share. Calculating the last year's worth of payments shows that LG Household & Health Care has a trailing yield of 0.7% on the current share price of ₩1611000. If you buy this business for its dividend, you should have an idea of whether LG Household & Health Care's dividend is reliable and sustainable. As a result, readers should always check whether LG Household & Health Care has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for LG Household & Health Care

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately LG Household & Health Care's payout ratio is modest, at just 30% of profit. A useful secondary check can be to evaluate whether LG Household & Health Care generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 43% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that LG Household & Health Care'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?

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. For this reason, we're glad to see LG Household & Health Care's earnings per share have risen 12% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, LG Household & Health Care has increased its dividend at approximately 16% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

Is LG Household & Health Care worth buying for its dividend? We love that LG Household & Health Care 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 LG Household & Health Care, and we would prioritise taking a closer look at it.

Wondering what the future holds for LG Household & Health Care? See what the 28 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

If you're in the market for dividend stocks, we recommend checking our list of top 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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