Why You Might Be Interested In eSang Networks Co.,Ltd (KOSDAQ:080010) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see eSang Networks Co.,Ltd (KOSDAQ:080010) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase eSang NetworksLtd's shares before the 27th of December in order to be eligible for the dividend, which will be paid on the 16th of April.

The company's upcoming dividend is ₩100.00 a share, following on from the last 12 months, when the company distributed a total of ₩100.00 per share to shareholders. Based on the last year's worth of payments, eSang NetworksLtd has a trailing yield of 1.9% on the current stock price of ₩5240.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for eSang NetworksLtd

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. eSang NetworksLtd is paying out just 11% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether eSang NetworksLtd generated enough free cash flow to afford its dividend. The good news is it paid out just 7.1% 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 eSang NetworksLtd 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see eSang NetworksLtd earnings per share are up 5.6% per annum 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. eSang NetworksLtd has delivered an average of 2.1% per year annual increase in its dividend, based on the past five 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.

The Bottom Line

From a dividend perspective, should investors buy or avoid eSang NetworksLtd? Earnings per share have been growing moderately, and eSang NetworksLtd 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. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and eSang NetworksLtd is halfway there. There's a lot to like about eSang NetworksLtd, and we would prioritise taking a closer look at it.

In light of that, while eSang NetworksLtd has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 2 warning signs for eSang NetworksLtd that we strongly recommend you have a look at before investing in the company.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.