Here's What We Like About Kukdo Chemical's (KRX:007690) Upcoming Dividend

Readers hoping to buy Kukdo Chemical Co., Ltd. (KRX:007690) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 29th of December in order to be eligible for this dividend, which will be paid on the 25th of March.

Kukdo Chemical's upcoming dividend is ₩1,500 a share, following on from the last 12 months, when the company distributed a total of ₩1,500 per share to shareholders. Last year's total dividend payments show that Kukdo Chemical has a trailing yield of 2.7% on the current share price of ₩55200. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Kukdo Chemical has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Kukdo Chemical

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Kukdo Chemical paying out a modest 26% 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. Luckily it paid out just 20% of its free cash flow last year.

It's positive to see that Kukdo Chemical'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 Kukdo Chemical 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 fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Kukdo Chemical's earnings per share have been growing at 11% a year for the past five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Kukdo Chemical has delivered an average of 6.5% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Has Kukdo Chemical got what it takes to maintain its dividend payments? We love that Kukdo Chemical 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 Kukdo Chemical, and we would prioritise taking a closer look at it.

While it's tempting to invest in Kukdo Chemical for the dividends alone, you should always be mindful of the risks involved. To that end, you should learn about the 3 warning signs we've spotted with Kukdo Chemical (including 1 which doesn't sit too well with us).

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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