KT Corporation (KRX:030200) Will Pay A ₩600.00 Dividend In Four Days

KT Corporation (KRX:030200) stock is about to trade ex-dividend in four days. The ex-dividend date is commonly two business days 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. 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. This means that investors who purchase KT's shares on or after the 4th of November will not receive the dividend, which will be paid on the 20th of November.

The company's upcoming dividend is ₩600.00 a share, following on from the last 12 months, when the company distributed a total of ₩2,400 per share to shareholders. Last year's total dividend payments show that KT has a trailing yield of 4.9% on the current share price of ₩49350.00. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. It paid out 85% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. 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. Over the last year, it paid out dividends equivalent to 247% of what it generated in free cash flow, a disturbingly high percentage. It's pretty hard to pay out more than you earn, so we wonder how KT intends to continue funding this dividend, or if it could be forced to cut the payment.

While KT's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were KT to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Check out our latest analysis for KT

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 KT earnings per share are up 8.8% per annum over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, KT has increased its dividend at approximately 17% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Is KT an attractive dividend stock, or better left on the shelf? Earnings per share have grown somewhat, although KT paid out over half its profits and the dividend was not well covered by free cash flow. Bottom line: KT has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

So if you're still interested in KT despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Every company has risks, and we've spotted 1 warning sign for KT you should know about.

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.