Interested In SK Telecom's (KRX:017670) Upcoming ₩830.00 Dividend? You Have Three Days Left

SK Telecom Co., Ltd. (KRX:017670) is about to trade ex-dividend in the next three days. The ex-dividend date generally occurs two days 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. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase SK Telecom's shares on or after the 28th of August will not receive the dividend, which will be paid on the 17th of September.

The company's upcoming dividend is ₩830.00 a share, following on from the last 12 months, when the company distributed a total of ₩3,540 per share to shareholders. Based on the last year's worth of payments, SK Telecom has a trailing yield of 6.4% on the current stock price of ₩55500.00. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether SK Telecom has been able to grow its dividends, or if the dividend might be cut.

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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. Its dividend payout ratio is 76% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. It could become a concern if earnings started to decline. 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. Thankfully its dividend payments took up just 27% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that SK Telecom'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.

View our latest analysis for SK Telecom

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at SK Telecom, with earnings per share up 3.2% on average over the last five years. A high payout ratio of 76% generally happens when a company can't find better uses for the cash. Combined with slim earnings growth in the past few years, SK Telecom could be signalling that its future growth prospects are thin.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. SK Telecom has delivered an average of 1.4% per year annual increase in its dividend, based on the past 10 years of dividend payments.

The Bottom Line

Should investors buy SK Telecom for the upcoming dividend? While earnings per share growth has been modest, SK Telecom's dividend payouts are around an average level; without a sharp change in earnings we feel that the dividend is likely somewhat sustainable. Pleasingly the company paid out a conservatively low percentage of its free cash flow. To summarise, SK Telecom looks okay on this analysis, although it doesn't appear a stand-out opportunity.

While it's tempting to invest in SK Telecom for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 1 warning sign for SK Telecom you should be aware of.

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.