Exicon Co., Ltd. (KOSDAQ:092870) Passed Our Checks, And It's About To Pay A ₩50.00 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Exicon Co., Ltd. (KOSDAQ:092870) is about to trade ex-dividend in the next 3 days. If you purchase the stock on or after the 29th of December, you won't be eligible to receive this dividend, when it is paid on the 20th of April.

Exicon's next dividend payment will be ₩50.00 per share, on the back of last year when the company paid a total of ₩65.00 to shareholders. Last year's total dividend payments show that Exicon has a trailing yield of 0.4% on the current share price of ₩15950. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Exicon has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Exicon

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Exicon is paying out just 7.2% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Luckily it paid out just 19% of its free cash flow 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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're not enthused to see that Exicon's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Exicon is retaining more than three-quarters of its earnings and has a history of generating some growth in earnings. We think this is a reasonable combination.

We'd also point out that Exicon issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Exicon's dividend payments per share have declined at 19% per year on average over the past two years, which is uninspiring.

To Sum It Up

Should investors buy Exicon for the upcoming dividend? Earnings per share have been flat over this time, but we're intrigued to see that Exicon is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. Generally we like to see both low payout ratios and strong earnings per share growth, but Exicon is halfway there. Exicon looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Exicon has an appealing dividend, it's worth knowing the risks involved with this stock. For instance, we've identified 4 warning signs for Exicon (1 is a bit concerning) you should be aware of.

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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