Income Investors Should Know That KG Chemical Corporation (KRX:001390) Goes Ex-Dividend Soon

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 KG Chemical Corporation (KRX:001390) is about to go ex-dividend in just 4 days. If you purchase the stock on or after the 29th of December, you won't be eligible to receive this dividend, when it is paid on the 28th of April.

KG Chemical's next dividend payment will be ₩350 per share. Last year, in total, the company distributed ₩350 to shareholders. Based on the last year's worth of payments, KG Chemical has a trailing yield of 1.5% on the current stock price of ₩23550. If you buy this business for its dividend, you should have an idea of whether KG Chemical's dividend is reliable and sustainable. So we need to investigate whether KG Chemical can afford its dividend, and if the dividend could grow.

View our latest analysis for KG Chemical

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 KG Chemical paying out a modest 44% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. What's good is that dividends were well covered by free cash flow, with the company paying out 7.9% of its cash flow 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 KG Chemical paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by KG Chemical's 8.9% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. KG Chemical has delivered an average of 5.8% per year annual increase in its dividend, based on the past 10 years of dividend payments.

To Sum It Up

Should investors buy KG Chemical for the upcoming dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. Overall, it's hard to get excited about KG Chemical from a dividend perspective.

So while KG Chemical looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 2 warning signs for KG Chemical (1 makes us a bit uncomfortable!) that deserve your attention before investing in the shares.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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