SK-Electronics CO.,LTD. (TSE:6677) Looks Like A Good Stock, And It's Going Ex-Dividend Soon
SK-Electronics CO.,LTD. (TSE:6677) stock is about to trade ex-dividend in 3 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Accordingly, SK-ElectronicsLTD investors that purchase the stock on or after the 29th of September will not receive the dividend, which will be paid on the 22nd of December.
The company's upcoming dividend is JP¥152.00 a share, following on from the last 12 months, when the company distributed a total of JP¥152 per share to shareholders. Looking at the last 12 months of distributions, SK-ElectronicsLTD has a trailing yield of approximately 4.7% on its current stock price of JP¥3250.00. 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 SK-ElectronicsLTD can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately SK-ElectronicsLTD's payout ratio is modest, at just 42% of profit. 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. Over the last year it paid out 70% of its free cash flow as dividends, within the usual range for most companies.
It's positive to see that SK-ElectronicsLTD'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.
View our latest analysis for SK-ElectronicsLTD
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see SK-ElectronicsLTD's earnings per share have risen 12% per annum over the last five years. SK-ElectronicsLTD has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. SK-ElectronicsLTD has delivered an average of 29% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
To Sum It Up
Is SK-ElectronicsLTD worth buying for its dividend? Earnings per share have grown at a nice rate in recent times and over the last year, SK-ElectronicsLTD paid out less than half its earnings and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.
On that note, you'll want to research what risks SK-ElectronicsLTD is facing. For example, we've found 1 warning sign for SK-ElectronicsLTD that we recommend you consider before investing in the business.
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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.