Here's What We Like About KPX ChemicalLtd's (KRX:025000) Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see KPX Chemical Co.,Ltd. (KRX:025000) is about to trade ex-dividend in the next 3 days. You will need to purchase shares before the 29th of December to receive the dividend, which will be paid on the 7th of April.

KPX ChemicalLtd's next dividend payment will be ₩2,000 per share, on the back of last year when the company paid a total of ₩2,500 to shareholders. Looking at the last 12 months of distributions, KPX ChemicalLtd has a trailing yield of approximately 4.4% on its current stock price of ₩56800. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for KPX 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. KPX ChemicalLtd paid out just 22% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether KPX ChemicalLtd generated enough free cash flow to afford its dividend. The good news is it paid out just 24% 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 KPX ChemicalLtd 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 earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at KPX ChemicalLtd, with earnings per share up 6.7% on average over the last five years. Earnings per share have been growing at a decent rate, and the company is retaining more than three-quarters of its earnings in the business. If profits are reinvested effectively, this could be a bullish combination for future earnings and dividends.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. KPX ChemicalLtd has delivered 5.2% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Has KPX ChemicalLtd got what it takes to maintain its dividend payments? Earnings per share have been growing moderately, and KPX ChemicalLtd 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 KPX ChemicalLtd is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about KPX ChemicalLtd, and we would prioritise taking a closer look at it.

While it's tempting to invest in KPX ChemicalLtd for the dividends alone, you should always be mindful of the risks involved. Be aware that KPX ChemicalLtd is showing 2 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...

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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