Is It Smart To Buy Spigen Korea Co., Ltd. (KOSDAQ:192440) Before It Goes Ex-Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Spigen Korea Co., Ltd. (KOSDAQ:192440) is about to trade ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 29th of December will not receive this dividend, which will be paid on the 17th of April.

Spigen Korea's next dividend payment will be ₩1,300 per share. Last year, in total, the company distributed ₩1,300 to shareholders. Based on the last year's worth of payments, Spigen Korea has a trailing yield of 2.0% on the current stock price of ₩65000. If you buy this business for its dividend, you should have an idea of whether Spigen Korea's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Spigen Korea

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Spigen Korea is paying out just 13% 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. It paid out 21% of its free cash flow as dividends last year, which is conservatively low.

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?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Spigen Korea earnings per share are up 3.5% per annum over the last five years. Growth has been anaemic. Yet with more than 75% of its earnings being kept in the business, there is ample room to reinvest in growth or lift the payout ratio - either of which could increase the dividend.

Given that Spigen Korea has only been paying a dividend for a year, there's not much of a past history to draw insight from.

The Bottom Line

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

While it's tempting to invest in Spigen Korea for the dividends alone, you should always be mindful of the risks involved. For example, we've found 2 warning signs for Spigen Korea (1 doesn't sit too well with us!) that deserve your attention before investing in the shares.

If you're in the market for dividend stocks, we recommend checking our list of top 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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