Kec Corporation (KRX:092220) Will Pay A ₩20.00 Dividend In Three Days

Readers hoping to buy Kec Corporation (KRX:092220) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Kec's shares before the 27th of December in order to be eligible for the dividend, which will be paid on the 28th of April.

The company's next dividend payment will be ₩20.00 per share. Last year, in total, the company distributed ₩20.00 to shareholders. Looking at the last 12 months of distributions, Kec has a trailing yield of approximately 2.5% on its current stock price of ₩792.00. If you buy this business for its dividend, you should have an idea of whether Kec's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Kec

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Kec reported a loss last year, so it's not great to see that it has continued paying a dividend. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Thankfully its dividend payments took up just 37% of the free cash flow it generated, which is a comfortable payout ratio.

Click here to see how much of its profit Kec paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Kec reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Kec's dividend payments per share have declined at 42% per year on average over the past two years, which is uninspiring.

Remember, you can always get a snapshot of Kec's financial health, by checking our visualisation of its financial health, here.

The Bottom Line

Is Kec an attractive dividend stock, or better left on the shelf? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. In summary, while it has some positive characteristics, we're not inclined to race out and buy Kec today.

While it's tempting to invest in Kec for the dividends alone, you should always be mindful of the risks involved. For example, Kec has 2 warning signs (and 1 which is a bit concerning) we think you should know about.

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.