Just Three Days Till e-LITECOM CO., Ltd. (KOSDAQ:041520) Will Be Trading Ex-Dividend

e-LITECOM CO., Ltd. (KOSDAQ:041520) stock is about to trade ex-dividend in three days. You can purchase shares before the 29th of December in order to receive the dividend, which the company will pay on the 6th of April.

e-LITECOM'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. Looking at the last 12 months of distributions, e-LITECOM has a trailing yield of approximately 0.7% on its current stock price of ₩13500. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for e-LITECOM

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. e-LITECOM paid out just 8.2% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. The good news is it paid out just 7.9% of its free cash flow in the last year.

It's positive to see that e-LITECOM'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 e-LITECOM paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. e-LITECOM's earnings per share have fallen at approximately 19% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. e-LITECOM has seen its dividend decline 6.7% per annum on average over the past 10 years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

Final Takeaway

Is e-LITECOM worth buying for its dividend? e-LITECOM has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

On that note, you'll want to research what risks e-LITECOM is facing. For example, we've found 2 warning signs for e-LITECOM (1 can't be ignored!) that deserve your attention before investing in the shares.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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