Is It Smart To Buy SUN KWANG CO.,Ltd. (KOSDAQ:003100) Before It Goes Ex-Dividend?

It looks like SUN KWANG CO.,Ltd. (KOSDAQ:003100) is about to go ex-dividend in the next four days. You will need to purchase shares before the 29th of December to receive the dividend, which will be paid on the 17th of April.

SUN KWANGLtd's upcoming dividend is ₩350 a share, following on from the last 12 months, when the company distributed a total of ₩350 per share to shareholders. Looking at the last 12 months of distributions, SUN KWANGLtd has a trailing yield of approximately 1.3% on its current stock price of ₩26500. 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.

See our latest analysis for SUN KWANGLtd

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. SUN KWANGLtd has a low and conservative payout ratio of just 24% of its income after tax. 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. Luckily it paid out just 5.5% of its free cash flow last year.

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 how much of its profit SUN KWANGLtd paid out over the last 12 months.

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 fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see SUN KWANGLtd's earnings have been skyrocketing, up 24% per annum for the past five years. SUN KWANGLtd looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, SUN KWANGLtd has lifted its dividend by approximately 3.4% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

To Sum It Up

Has SUN KWANGLtd got what it takes to maintain its dividend payments? It's great that SUN KWANGLtd is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about SUN KWANGLtd, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks SUN KWANGLtd is facing. For instance, we've identified 3 warning signs for SUN KWANGLtd (1 makes us a bit uncomfortable) you should be aware of.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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