IQUEST (KOSDAQ:262840) Could Be A Buy For Its Upcoming Dividend

IQUEST Co., Ltd. (KOSDAQ:262840) 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. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase IQUEST's shares before the 27th of December to receive the dividend, which will be paid on the 8th of April.

The company's next dividend payment will be ₩50.00 per share. Last year, in total, the company distributed ₩50.00 to shareholders. Based on the last year's worth of payments, IQUEST stock has a trailing yield of around 2.1% on the current share price of ₩2345.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for IQUEST

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately IQUEST's payout ratio is modest, at just 27% of profit. A useful secondary check can be to evaluate whether IQUEST generated enough free cash flow to afford its dividend. It paid out 15% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that IQUEST'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 IQUEST 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. This is why it's a relief to see IQUEST earnings per share are up 9.0% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. It looks like the IQUEST dividends are largely the same as they were three years ago.

To Sum It Up

Is IQUEST worth buying for its dividend? Earnings per share have been growing moderately, and IQUEST 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 IQUEST is halfway there. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in IQUEST for the dividends alone, you should always be mindful of the risks involved. To that end, you should learn about the 2 warning signs we've spotted with IQUEST (including 1 which is concerning).

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.