Is It Worth Considering Sewoon Medical Co., Ltd (KOSDAQ:100700) For Its Upcoming Dividend?

It looks like Sewoon Medical Co., Ltd (KOSDAQ:100700) is about to go ex-dividend in the next 3 days. The ex-dividend date generally occurs two days 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. 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, Sewoon Medical investors that purchase the stock on or after the 29th of December will not receive the dividend, which will be paid on the 27th of April.

The company's upcoming dividend is ₩60.00 a share, following on from the last 12 months, when the company distributed a total of ₩60.00 per share to shareholders. Based on the last year's worth of payments, Sewoon Medical stock has a trailing yield of around 2.4% on the current share price of ₩2470.00. 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 Sewoon Medical can afford its dividend, and if the dividend could grow.

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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. Sewoon Medical has a low and conservative payout ratio of just 22% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. What's good is that dividends were well covered by free cash flow, with the company paying out 17% of its cash flow last year.

It's positive to see that Sewoon Medical'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.

Check out our latest analysis for Sewoon Medical

Click here to see how much of its profit Sewoon Medical paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. So we're not too excited that Sewoon Medical's earnings are down 3.8% a year over the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Sewoon Medical has delivered 3.1% dividend growth per year on average over the past six years.

The Bottom Line

Should investors buy Sewoon Medical 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. In summary, it's hard to get excited about Sewoon Medical from a dividend perspective.

While it's tempting to invest in Sewoon Medical for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 1 warning sign for Sewoon Medical 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.