ELP Corporation (KOSDAQ:063760) Will Pay A ₩50.00 Dividend In Three Days

It looks like ELP Corporation (KOSDAQ:063760) is about to go ex-dividend in the next 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 important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase ELP's shares 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 ₩50.00 a share, following on from the last 12 months, when the company distributed a total of ₩50.00 per share to shareholders. Based on the last year's worth of payments, ELP has a trailing yield of 2.0% on the current stock price of ₩2460.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether ELP can afford its dividend, and if the dividend could grow.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. ELP paid out a comfortable 37% of its profit last year. A useful secondary check can be to evaluate whether ELP generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 34% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that ELP'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 ELP

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're discomforted by ELP's 21% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. ELP's dividend payments per share have declined at 6.5% per year on average over the past six years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

To Sum It Up

Should investors buy ELP for the upcoming dividend? ELP has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. To summarise, ELP looks okay on this analysis, although it doesn't appear a stand-out opportunity.

So while ELP looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. We've identified 3 warning signs with ELP (at least 1 which is a bit concerning), and understanding them should be part of your investment process.

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.