Incheon City Gas Co., Ltd. (KRX:034590) Stock Goes Ex-Dividend In Just Three Days

Incheon City Gas Co., Ltd. (KRX:034590) is about to trade ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 29th of December will not receive the dividend, which will be paid on the 31st of March.

Incheon City Gas's upcoming dividend is ₩1,250 a share, following on from the last 12 months, when the company distributed a total of ₩1,250 per share to shareholders. Based on the last year's worth of payments, Incheon City Gas has a trailing yield of 4.8% on the current stock price of ₩26150. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Incheon City Gas

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Incheon City Gas paid out a comfortable 50% of its profit last year. 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 more than half (69%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Incheon City Gas'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.

Click here to see how much of its profit Incheon City Gas paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Incheon City Gas's earnings per share have fallen at approximately 5.4% a year over the previous three years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Incheon City Gas has increased its dividend at approximately 1.0% a year on average.

The Bottom Line

Should investors buy Incheon City Gas for the upcoming dividend? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

With that being said, if dividends aren't your biggest concern with Incheon City Gas, you should know about the other risks facing this business. Our analysis shows 2 warning signs for Incheon City Gas that we strongly recommend you have a look at before investing in the company.

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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