Posco Dx Company Ltd. (KRX:022100) Looks Interesting, And It's About To Pay A Dividend

Readers hoping to buy Posco Dx Company Ltd. (KRX:022100) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. This means that investors who purchase Posco Dx's shares on or after the 30th of July will not receive the dividend, which will be paid on the 31st of August.

The company's next dividend payment will be ₩60.00 per share, on the back of last year when the company paid a total of ₩125 to shareholders. Based on the last year's worth of payments, Posco Dx stock has a trailing yield of around 0.7% on the current share price of ₩19210.00. If you buy this business for its dividend, you should have an idea of whether Posco Dx's dividend is reliable and sustainable. As a result, readers should always check whether Posco Dx has been able to grow its dividends, or if the dividend might be cut.

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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. Posco Dx is paying out an acceptable 55% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Posco Dx generated enough free cash flow to afford its dividend. The good news is it paid out just 15% 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.

View our latest analysis for Posco Dx

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Posco Dx's earnings have been skyrocketing, up 32% per annum for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Posco Dx has delivered an average of 14% per year annual increase in its dividend, based on the past seven years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Has Posco Dx got what it takes to maintain its dividend payments? Posco Dx's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. It's a promising combination that should mark this company worthy of closer attention.

On that note, you'll want to research what risks Posco Dx is facing. Every company has risks, and we've spotted 1 warning sign for Posco Dx 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.