Kyung Nong Corporation (KRX:002100) Looks Interesting, And It's About To Pay A Dividend

It looks like Kyung Nong Corporation (KRX:002100) is about to go ex-dividend in the next four days. Investors can purchase shares before the 29th of December in order to be eligible for this dividend, which will be paid on the 2nd of April.

Kyung Nong's next dividend payment will be ₩220 per share, on the back of last year when the company paid a total of ₩220 to shareholders. Based on the last year's worth of payments, Kyung Nong stock has a trailing yield of around 1.9% on the current share price of ₩11700. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Kyung Nong can afford its dividend, and if the dividend could grow.

See our latest analysis for Kyung Nong

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. Fortunately Kyung Nong's payout ratio is modest, at just 38% of profit. A useful secondary check can be to evaluate whether Kyung Nong generated enough free cash flow to afford its dividend. Fortunately, it paid out only 26% of its free cash flow in the past year.

It's positive to see that Kyung Nong'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 Kyung Nong paid out over the last 12 months.

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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Kyung Nong, with earnings per share up 6.2% on average over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Kyung Nong has delivered 1.0% dividend growth per year on average over the past 10 years.

The Bottom Line

Has Kyung Nong got what it takes to maintain its dividend payments? Earnings per share have been growing moderately, and Kyung Nong is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Kyung Nong is being conservative with its dividend payouts and could still perform reasonably over the long run. It's a promising combination that should mark this company worthy of closer attention.

In light of that, while Kyung Nong has an appealing dividend, it's worth knowing the risks involved with this stock. We've identified 4 warning signs with Kyung Nong (at least 2 which are significant), and understanding these 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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