Should You Buy Ahn-Gook Pharmaceutical Co., Ltd. (KOSDAQ:001540) For Its Upcoming Dividend?

Ahn-Gook Pharmaceutical Co., Ltd. (KOSDAQ:001540) is about to trade ex-dividend in the next 4 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 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. Thus, you can purchase Ahn-Gook Pharmaceutical's shares before the 29th of December in order to receive the dividend, which the company will pay on the 20th of April.

The company's next dividend payment will be ₩440.00 per share. Last year, in total, the company distributed ₩440 to shareholders. Based on the last year's worth of payments, Ahn-Gook Pharmaceutical stock has a trailing yield of around 4.9% on the current share price of ₩9020.00. 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 check whether the dividend payments are covered, and if earnings are growing.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

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. Ahn-Gook Pharmaceutical paid out 51% of its earnings to investors last year, a normal payout level for most businesses. 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. The good news is it paid out just 13% of its free cash flow in the last year.

It's positive to see that Ahn-Gook Pharmaceutical'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 Ahn-Gook Pharmaceutical

Click here to see how much of its profit Ahn-Gook Pharmaceutical paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Ahn-Gook Pharmaceutical has grown its earnings rapidly, up 31% a year for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Ahn-Gook Pharmaceutical could have strong prospects for future increases to the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Ahn-Gook Pharmaceutical has delivered an average of 12% per year annual increase in its dividend, based on the past six years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

From a dividend perspective, should investors buy or avoid Ahn-Gook Pharmaceutical? We like Ahn-Gook Pharmaceutical's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Ahn-Gook Pharmaceutical looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while Ahn-Gook Pharmaceutical looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 2 warning signs for Ahn-Gook Pharmaceutical that you should be aware of before investing in their shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.