Is It Worth Considering Kyungdong City Gas Co., Ltd (KRX:267290) For Its Upcoming Dividend?

Readers hoping to buy Kyungdong City Gas Co., Ltd (KRX:267290) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day 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. 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. In other words, investors can purchase Kyungdong City Gas' shares before the 27th of December in order to be eligible for the dividend, which will be paid on the 21st of April.

The company's next dividend payment will be ₩875.00 per share, on the back of last year when the company paid a total of ₩875 to shareholders. Calculating the last year's worth of payments shows that Kyungdong City Gas has a trailing yield of 4.8% on the current share price of ₩18140.00. 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.

See our latest analysis for Kyungdong City Gas

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. Kyungdong City Gas has a low and conservative payout ratio of just 18% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. What's good is that dividends were well covered by free cash flow, with the company paying out 8.6% of its cash flow last year.

It's positive to see that Kyungdong 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 Kyungdong City Gas paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's not ideal to see Kyungdong City Gas's earnings per share have been shrinking at 3.8% a year over the previous five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Kyungdong City Gas has delivered 4.6% dividend growth per year on average over the past five years.

The Bottom Line

Should investors buy Kyungdong City Gas for the upcoming dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. Overall, it's hard to get excited about Kyungdong City Gas from a dividend perspective.

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

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.