Stock Analysis

KSS Line Ltd. (KRX:044450) Looks Interesting, And It's About To Pay A Dividend

KOSE:A044450
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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that KSS Line Ltd. (KRX:044450) is about to go ex-dividend in just three days. If you purchase the stock on or after the 29th of December, you won't be eligible to receive this dividend, when it is paid on the 3rd of April.

KSS Line's next dividend payment will be ₩270 per share, and in the last 12 months, the company paid a total of ₩270 per share. Looking at the last 12 months of distributions, KSS Line has a trailing yield of approximately 2.6% on its current stock price of ₩10450. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether KSS Line can afford its dividend, and if the dividend could grow.

View our latest analysis for KSS Line

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. KSS Line is paying out just 22% 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. Fortunately, it paid out only 35% of its free cash flow in the past 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 KSS Line paid out over the last 12 months.

historic-dividend
KOSE:A044450 Historic Dividend December 25th 2020

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 KSS Line earnings per share are up 6.6% per annum over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, KSS Line has lifted its dividend by approximately 18% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Is KSS Line worth buying for its dividend? Earnings per share have been growing moderately, and KSS Line 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. It might be nice to see earnings growing faster, but KSS Line is being conservative with its dividend payouts and could still perform reasonably over the long run. Overall we think this is an attractive combination and worthy of further research.

So while KSS Line looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - KSS Line has 1 warning sign we think you should be aware of.

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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