Okong (KOSDAQ:045060) Could Be A Buy For Its Upcoming Dividend

Okong Corporation (KOSDAQ:045060) stock is about to trade ex-dividend in 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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. In other words, investors can purchase Okong's shares before the 27th of December in order to be eligible for the dividend, which will be paid on the 25th of April.

The company's next dividend payment will be ₩50.00 per share, on the back of last year when the company paid a total of ₩50.00 to shareholders. Based on the last year's worth of payments, Okong stock has a trailing yield of around 1.9% on the current share price of ₩2570.00. If you buy this business for its dividend, you should have an idea of whether Okong's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Okong

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Okong is paying out just 9.0% 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 Okong generated enough free cash flow to afford its dividend. The good news is it paid out just 16% of its free cash flow in the last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Okong 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Okong, with earnings per share up 2.7% on average over the last five years. Okong is retaining more than three-quarters of its earnings and has a history of generating some growth in earnings. We think this is a reasonable combination.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Okong's dividend payments are effectively flat on where they were five years ago.

To Sum It Up

Should investors buy Okong for the upcoming dividend? Earnings per share growth has been growing somewhat, and Okong is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Okong is being conservative with its dividend payouts and could still perform reasonably over the long run. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Okong is facing. Case in point: We've spotted 1 warning sign for Okong you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.