Tae Kwang Corporation (KOSDAQ:023160) Passed Our Checks, And It's About To Pay A ₩285.00 Dividend

Tae Kwang Corporation (KOSDAQ:023160) is about to trade ex-dividend in the next four 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Tae Kwang's shares on or after the 25th of August, you won't be eligible to receive the dividend, when it is paid on the 9th of September.

The company's next dividend payment will be ₩285.00 per share, and in the last 12 months, the company paid a total of ₩250 per share. Calculating the last year's worth of payments shows that Tae Kwang has a trailing yield of 1.1% on the current share price of ₩22200.00. If you buy this business for its dividend, you should have an idea of whether Tae Kwang's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

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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. Tae Kwang is paying out just 17% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Tae Kwang generated enough free cash flow to afford its dividend. The good news is it paid out just 17% of its free cash flow in the last 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.

See our latest analysis for Tae Kwang

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. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Tae Kwang has grown its earnings rapidly, up 39% a year for the past five years. Tae Kwang looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past seven years, Tae Kwang has increased its dividend at approximately 26% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Has Tae Kwang got what it takes to maintain its dividend payments? Tae Kwang has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past seven years, but the conservative payout ratio makes the current dividend look sustainable. It's a promising combination that should mark this company worthy of closer attention.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we've spotted 1 warning sign for Tae Kwang 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.