Is It Smart To Buy TOPTEC Co., Ltd (KOSDAQ:108230) Before It Goes Ex-Dividend?

Readers hoping to buy TOPTEC Co., Ltd (KOSDAQ:108230) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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. Therefore, if you purchase TOPTEC's shares on or after the 27th of December, you won't be eligible to receive the dividend, when it is paid on the 22nd of April.

The company's next dividend payment will be ₩300.00 per share, on the back of last year when the company paid a total of ₩300 to shareholders. Based on the last year's worth of payments, TOPTEC has a trailing yield of 6.5% on the current stock price of ₩4635.00. If you buy this business for its dividend, you should have an idea of whether TOPTEC's dividend is reliable and sustainable. So we need to investigate whether TOPTEC can afford its dividend, and if the dividend could grow.

View our latest analysis for TOPTEC

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. TOPTEC paid out just 15% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. The good news is it paid out just 11% 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 TOPTEC 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. That's why it's comforting to see TOPTEC's earnings have been skyrocketing, up 29% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, TOPTEC looks like a promising growth company.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. TOPTEC has delivered 15% dividend growth per year on average over the past five years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Is TOPTEC worth buying for its dividend? It's great that TOPTEC is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about TOPTEC, and we would prioritise taking a closer look at it.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, we've found 1 warning sign for TOPTEC that we recommend you consider before investing in the business.

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.