We Wouldn't Be Too Quick To Buy CJ Cheiljedang Corporation (KRX:097950) Before It Goes Ex-Dividend
CJ Cheiljedang Corporation (KRX:097950) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, CJ Cheiljedang investors that purchase the stock on or after the 28th of August will not receive the dividend, which will be paid on the 30th of September.
The company's next dividend payment will be ₩1500.00 per share, on the back of last year when the company paid a total of ₩6,000 to shareholders. Based on the last year's worth of payments, CJ Cheiljedang stock has a trailing yield of around 3.3% on the current share price of ₩184000.00. If you buy this business for its dividend, you should have an idea of whether CJ Cheiljedang's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. CJ Cheiljedang paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Thankfully its dividend payments took up just 26% of the free cash flow it generated, which is a comfortable payout ratio.
View our latest analysis for CJ Cheiljedang
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. CJ Cheiljedang was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. CJ Cheiljedang has delivered an average of 9.1% per year annual increase in its dividend, based on the past 10 years of dividend payments.
Get our latest analysis on CJ Cheiljedang's balance sheet health here.
The Bottom Line
Should investors buy CJ Cheiljedang for the upcoming dividend? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. Bottom line: CJ Cheiljedang has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.
With that being said, if you're still considering CJ Cheiljedang as an investment, you'll find it beneficial to know what risks this stock is facing. For example, CJ Cheiljedang has 2 warning signs (and 1 which is concerning) we think 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.