Is It Smart To Buy JYP Entertainment Corporation (KOSDAQ:035900) Before It Goes Ex-Dividend?

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 JYP Entertainment Corporation (KOSDAQ:035900) is about to go ex-dividend in just three days. Investors can purchase shares before the 29th of December in order to be eligible for this dividend, which will be paid on the 13th of April.

JYP Entertainment's next dividend payment will be ₩155 per share, and in the last 12 months, the company paid a total of ₩155 per share. Calculating the last year's worth of payments shows that JYP Entertainment has a trailing yield of 0.4% on the current share price of ₩37050. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for JYP Entertainment

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. JYP Entertainment has a low and conservative payout ratio of just 17% of its income after tax. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 21% of its cash flow last year.

It's positive to see that JYP Entertainment'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 the company's payout ratio, plus analyst estimates of its future dividends.

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see JYP Entertainment has grown its earnings rapidly, up 30% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, JYP Entertainment looks like a promising growth company.

Unfortunately JYP Entertainment has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

The Bottom Line

Is JYP Entertainment worth buying for its dividend? JYP Entertainment has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. It's a promising combination that should mark this company worthy of closer attention.

Ever wonder what the future holds for JYP Entertainment? See what the 13 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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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