Youlchon Chemical Co.,Ltd. (KRX:008730) Stock Goes Ex-Dividend In Just Four Days

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Youlchon Chemical Co.,Ltd. (KRX:008730) is about to trade ex-dividend in the next four days. You will need to purchase shares before the 29th of December to receive the dividend, which will be paid on the 22nd of April.

Youlchon ChemicalLtd's next dividend payment will be ₩500 per share, on the back of last year when the company paid a total of ₩500 to shareholders. Looking at the last 12 months of distributions, Youlchon ChemicalLtd has a trailing yield of approximately 2.5% on its current stock price of ₩20050. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Youlchon ChemicalLtd

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Youlchon ChemicalLtd is paying out an acceptable 56% of its profit, a common payout level among most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Thankfully its dividend payments took up just 37% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Youlchon ChemicalLtd'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 Youlchon ChemicalLtd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's not ideal to see Youlchon ChemicalLtd's earnings per share have been shrinking at 4.1% a year over the previous three years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Youlchon ChemicalLtd's dividend payments are effectively flat on where they were 10 years ago. When earnings are declining yet the dividends are flat, typically the company is either paying out a higher portion of its earnings, or paying out of cash or debt on the balance sheet, neither of which is ideal.

The Bottom Line

Should investors buy Youlchon ChemicalLtd for the upcoming dividend? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. Overall, it's hard to get excited about Youlchon ChemicalLtd from a dividend perspective.

If you want to look further into Youlchon ChemicalLtd, it's worth knowing the risks this business faces. Every company has risks, and we've spotted 1 warning sign for Youlchon ChemicalLtd you should know about.

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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